The National Australia Bank (NAB)<\/strong> has joined its major competitors in adjusting its forecast for the first Reserve Bank of Australia (RBA)<\/strong> interest rate cut, now expecting a reduction in February 2025. This revision comes amid signs of cooling inflation, offering potential relief for mortgage holders.<\/p>\n\n\n\n
Australia\u2019s consumer price index (CPI)<\/strong> for the December quarter revealed an annual inflation rate of 2.4%<\/strong>, its lowest in three years. This decline, alongside softer underlying inflation figures, has prompted NAB economists to bring forward their expectations for a 25 basis point rate cut<\/strong> at the RBA\u2019s first policy meeting of the year.<\/p>\n\n\n\n
\u201cWe now expect the RBA to cut the cash rate by 25 basis points in February,\u201d NAB chief economist Alan Oster<\/strong> stated in a note. He explained that the inflation data had moderated more quickly than anticipated, making an earlier easing of monetary policy more likely.<\/p>\n\n\n\n
NAB\u2019s revised projection aligns with those of other major banks<\/a>, all of which now foresee an interest rate reduction in February.<\/p>\n\n\n\n
If the RBA moves forward with the expected rate cuts, mortgage holders could see a reduction in monthly repayments<\/strong>. According to economist Stephen Koukoulas<\/strong>, every 25 basis point cut<\/strong> equates to an estimated $96 per month in savings on a $500,000 mortgage<\/strong>. A series of four such cuts could reduce payments by $385 per month<\/strong>.<\/p>\n\n\n\n
With one in ten mortgage holders<\/strong> expressing concerns about being forced to sell their homes if rate cuts are delayed, an earlier reduction may provide financial relief.<\/p>\n\n\n\n
Each of Australia\u2019s big four banks<\/strong> has now shifted its projections toward an initial February 2025<\/strong> rate cut, although their expectations for the extent of reductions vary:<\/p>\n\n\n\n
These forecasts mark a shift from earlier expectations. In November, Westpac and ANZ<\/strong> had delayed their rate cut outlooks to May 2025, but both have since returned to the February timeline.<\/p>\n\n\n\n
The latest inflation report has reinforced expectations that the RBA will begin easing monetary policy sooner rather than later. Westpac chief economist Luci Ellis<\/strong>, formerly an RBA assistant governor, noted that inflation data had been the decisive factor in revising their forecast.<\/p>\n\n\n\n
Similarly, Commonwealth Bank\u2019s head of Australian economics, Gareth Aird<\/strong>, described the data as a \u201cgreen light\u201d<\/strong> for a February rate cut, emphasizing that inflation was softer than the RBA\u2019s previous projections.<\/p>\n\n\n\n
Beyond February, the RBA\u2019s approach is expected to remain gradual, with economic indicators such as employment data and global financial trends<\/strong> playing a role in determining future cuts. Bendigo Bank<\/a>\u2019s<\/strong> forecast suggests three cuts in 2025, with a second reduction likely in May if inflation remains stable.<\/p>\n\n\n\n