Another major shifts rate cut forecast

Major bank NAB has announced in its latest Monetary Policy Update that it has shifted its forecast of a rate cut to February 2025 from May 2025.

NAB’s economics team informed that they expect the Reserve Bank of Australia (RBA) to steadily lower the official cash rate once per quarter, eventually stopping at 3.1 per cent in early 2026.

According to NAB, while domestic inflationary pressures are “cooling”, they are doing so only gradually, with conditions for a cut still not being in place this year.

Indeed, the latest Consumer Price Index (CPI) data released by the Australian Bureau of Statistics (ABS) revealed that inflation had returned to the RBA’s target band of 2–3 per cent, with the monthly CPI figures for August showing an easing to 2.7 per cent.

“The risk has been skewed to a first cut earlier in 2025, and today’s [30 September] change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected,” NAB’s economics team said.

“It remains our view that RBA cuts will be later and shallower than many peer central banks.”

The update further said that elevated inflation is being sustained by “housing and stubborn pressures across domestic labour and non-labour costs”, with the major bank expecting underlying CPI of 2.6 per cent over 2025.

“Further easing is expected as growth remains below trend in the near term, and we expect by February the RBA will have seen enough to conclude that excess demand is receding as an inflation driver and policy can begin to adjust away from modestly restrictive settings,” the economics team said.

“The RBA has less space to adjust the level of restriction while continuing to weigh down on activity, and so will begin to cut later than peer central banks that moved policy more deeply into restrictive territory.”

This comes as the latest cash rate shift was seen from the major banks. Ahead of the RBA’s September monetary policy decision, the Commonwealth Bank of Australia (CBA) became the last of its big four counterparts to move away from a rate cut in November this year, albeit only slightly.

CBA’s head of Australian economics Gareth Aird said that while the base case for an easing cycle is still expected to commence this year, the call has been moved a month back to the December monetary policy meeting.

Aird said: “We continue to expect a more pronounced softening in the inflationary pulse over 3Q24 compared to the RBA. The already released private prices gauges for August underpin this view. And we anticipate the August monthly CPI indicator will step down materially to 2.7 per cent per year.

“But the August labour market data was stronger than we expected. Employment rose by a robust 47,500 over the month and the unemployment. Employment rose by a robust 47,500 over the month and the unemployment rate held at 4.2 per cent. We had forecast a lift in the unemployment rate to 4.3 per cent.”

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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