News: WBC UPDATE 1-Westpac and NAB see Australia rates rising faster and higher

• Westpac eyes terminal rate of 3.35%, NAB sees 2.85%
• CBA and ANZ already raised their f'casts recently
• Shifts bring bank economists closer to mkt pricing

(Adds Westpac forecast, background changes slug to AUSTRALIA-RATES/FORECASTS)

SINGAPORE, July 22 (Reuters) - Westpac and National Australia Bank raised predictions for Australia's benchmark cash rate on Friday, following similar moves by their peers and rate-traders who think low unemployment and persistent inflation will drive the central bank to continue tightening policy.

National Australia Bank (NAB) said it now expects the benchmark cash rate AUCBIR=ECI , currently at 1.35%, to hit a peak of 2.85% by year's end.

Westpac (WBC) forecasts rates over 3% by year's end before reaching a peak at 3.35% in February. Both banks had previously forecast a peak at 2.6%.

"We think this higher terminal rate will reflect the (Reserve Bank of Australia's) risk-averse approach, which will lead it to err on the side of ensuring inflationary expectations are contained," said Westpac's chief economist, Bill Evans.

Consumer prices are rising at their fastest pace in 20 years in Australia and this week the top central banker indicated rates might need to rise to 2.5% to tame it.

ANZ Bank (ANZ) and the Commonwealth Bank of Australia (CBA) also raised their rate-hike expectations recently, with ANZ forecasting rates hitting a high of 3.35% by November and CBA expecting a peak of 2.6% to be hit by November.

"The recent drop in the unemployment rate to 3.5% is too large to ignore," NAB economists said.

"Current high inflation risks a material rise in inflation expectations which could feed into the wage-bargaining process given the very tight labour market."

The moves pull the economists closer to market pricing, which suggests traders expect rates to peak around 3.7% in March 2023. The RBA next meets in August and markets are certain of a 50 basis point (bps) hike, and see a 15% chance of a 75 bps hike to 2.1%. 0#RBAWATCH

The pricing has leant some support to the Australian dollar this week, though a strong U.S. dollar has capped gains.