One of the nation's biggest banks has warned that official interest rates will be halved within months in a bid to strengthen the economy as signs grow job seekers in Sydney and Melbourne will find it increasingly difficult to get work.

Westpac on Wednesday became the first of the major banks to predict the Reserve Bank of Australia, which has cut official rates at its last two board meetings, will be forced to take rates down to 0.5 per cent. It may even have to consider a radical plan to lend directly to commercial banks to help drive down mortgage rates.

The bank's chief economist Bill Evans said the Reserve was likely to hold rates at its meeting in the first week of August, however beyond that there seemed little option but for it to continue slicing the cost of money.

The RBA is likely to cut official interest rates to 0.5 per cent by February, Westpac's chief economist has warned.

A quarter percentage point cut by October and then a follow-up reduction at its February meeting were now likely.