NAB brings forward RBA interest rate cut forecast: ‘Sooner than expected’
NAB has brought forward the timing of its RBA interest rate cut forecast to February 2025, from May 2025.
NAB believes Aussie mortgage holders could be getting interest rate relief sooner than expected. The major bank has brought forward its expectation of when the Reserve Bank of Australia (RBA) will start cutting interest rates.
NAB, Australia’s third biggest home loan lender, now expects the central bank will start rate cuts in February 2025, rather than May 2025. The move brings NAB in line with fellow big banks Westpac and ANZ, while CBA is hoping for a December 2024 rate cut.
“[T]he balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected,” NAB said. “It remains our view that RBA cuts will be later and shallower than many peer central banks.”
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The US Federal Reserve cut interest rates by 0.50 per cent earlier this month, putting pressure on the RBA to cut rates. It joined other countries like New Zealand, Canada and the UK.
NAB said it had not made any material shifts to its forecasts and expected the unemployment rate would rise a bit further before sitting at around 4.5 per cent.
The unemployment rate held steady at 4.2 per cent in July, while monthly inflation fell from 3.5 per cent to 2.7 per cent in August. NAB said it expects underlying CPI of 2.6 per cent over 2025.
NAB expects the RBA will cut rates by 0.25 per cent to 4.1 per cent in February 2025, followed by one cut per quarter until the cash rate reaches 3.1 per cent in early 2026.
“The risks skew to a later first cut, but also to a faster cadence of cuts than our central profile,” NAB said.
“The worst of the real income squeeze is behind us as inflation has moderated and tax cuts flow through.
“If that supports a more material pickup in activity that slows or stalls progress on disinflation, the RBA will hold for longer.”
RBA stays no rate cuts in ‘near-term’
RBA governor Michele Bullock reiterated last week that an interest rate cut was not on the cards in the “near-term”. However, she revealed the board did not “explicitly” consider an interest rate rise in the September meeting.
"The message clearly from the board is that in the near-term it does not see interest rate cuts," Bullock said.
The board noted it would be “some time yet” before inflation was sustainably in the 2 to 3 per cent target range.
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