NAB pulls forward rate cut forecast to February
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The news: NAB has followed Westpac, UBS and Bendigo Bank in bringing forward its expectation for the Reserve Bank's next interest rate cut after a lower-than-expected inflation result for the December quarter.
The numbers: NAB now expects the RBA to cut the cash rate by 25 basis points in February.
Since June last year, the bank has expected the RBA to make cuts of 75 or 100 basis points in 2025, beginning in February or May, but most recently predicted one cut per quarter from May 2025 until mid-2026.
Despite the change, NAB said it still expects the cutting phase to be gradual, with the central bank taking the cash rate down to 3.1% by February 2026.
The RBA has held rates at 4.35% since November 2023 when it increased rates by 25 basis points. The central bank has not cut rates since November 2020.
The context: NAB said that fourth-quarter CPI figures, released on Wednesday, confirms that inflation has moderated more quickly than the RBA expected.
It sets up a likely downward revision to the inflation profile in the central bank's February statement on monetary policy, NAB noted, making next month the most likely starting point for a gradual easing in interest rates.
The source: NAB research
