NAB expects 50bps rate cut in May, quicker easing from RBA

The news: National Australia Bank economists are predicting an outsized rate cut at the Reserve Bank's next policy meeting and quicker monetary policy easing through the next 12 months.

The numbers: NAB now expects the RBA to cut by 50 basis points in May, followed by 25bps in July, August, November and February 2026. The central bank held interest rates at 4.1% earlier this month, after cutting them in February for the first time in nearly five years.

The context: The economists said risks to both global and domestic growth have shifted to the downside since the 1 April meeting, and a restrictive policy stance in Australia is no longer appropriate against this backdrop. “Headwinds from the global environment have intensified, but error bounds around our forecast are large given uncertainty remains exceptionally elevated,” economists Sally Auls and Gareth Spence said in a note.

The economists slightly raised their near-term unemployment forecast and trimmed growth expectations for 2025, but said they ultimately expect a larger policy response will be needed to keep activity on track.