A major bank has revised its interest rate forecast, suggesting that rates could fall by more than one percent during 2025.
National Australia Bank Chief Economist Sally Auld, in a statement released today, said she expected the cash rate would fall to 2.6 percent by February 26, 2026.
This would be off the back of a 50 basis points (0.5) drop in May, followed by 25 basis points in July, August and November.
“Our call for a 50bps easing in May reflects the fact that with the real cash rate of 1.3 percent and policy currently restrictive, the RBA needs to play catch up,” Dr Auld said.
“Once the cash rate reaches a level more consistent with a neutral policy setting, we then expect the RBA to pause for a few months before taking the cash rate into modestly accommodative territory.”
Dr Auld said the downward shift in domestic and global growth since the RBA last met in early April meant a restrictive policy stance in Australia was no longer appropriate.
NAB Economics has also revised down its unemployment rate forecast and shaved growth projections for 2025.
“A weaker global backdrop and the impacts of weaker consumer and business confidence have now shifted the distribution of risks away from a tighter labour market and towards the risk of a rise in the unemployment rate,” she said.
“We now see GDP growth of 2.0 percent over 2025 (was 2.25 percent) and see the unemployment rate peaking slightly higher at around 4.4 percent before edging back down to around 4.25 percent at end 2026.”
Read the full Monetary Policy Update.
