NAB expects major cuts in Reserve Bank interest rates starting May. Inflation falls into target, giving relief to Australian homeowners.


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πŸ’Έ Major Cuts Expected in Reserve Bank Interest Rates

Australia's mortgage holders may soon breathe easier as the National Australia Bank (NAB) forecasts significant cuts in Reserve Bank interest rates over the coming months.

The bank’s Chief Economist Sally Auld predicts up to 100 basis points in rate reductions by August 2025, with additional cuts likely before early 2026—signaling relief for households battling rising costs.

πŸ”» Interest Rate Cut Timeline by NAB

Here's what NAB expects for the Reserve Bank of Australia (RBA):

  • βœ‚οΈ 50bps cut in May

  • βœ‚οΈ 25bps each in July and August

  • βœ‚οΈ More reductions in November and February

If realised, the official cash rate would fall from 4.10% to:

  • βœ… 3.10% by August

  • βœ… 2.85% by the end of 2025

  • βœ… 2.60% by February 2026

🧠 RBA Urged to Rethink Approach

According to NAB, the RBA must adjust its strategy:

  • πŸ”„ Recognize that inflation risks are now skewed to the downside

  • ⚑ Shift to a more proactive and bold monetary policy stance

πŸ“Š Inflation Data Strengthens the Case

Fresh data from the Australian Bureau of Statistics shows underlying inflation has dropped back into the RBA’s target range for the first time since 2021, boosting confidence in the likelihood of cuts.

πŸ—³οΈ Election Outcome Brings Market Confidence

NAB also credits Labor’s landslide win in the federal election for providing political certainty, helping create a more stable environment for economic decisions.

🌐 Global Outlook Still Shaky

Despite local positives, NAB is cautious globally, noting:

  • πŸ” Trump’s trade tariffs continue to impact global markets

  • πŸ“‰ Weaker international economic activity is a growing concern

Even as Bendigo Bank echoes similar forecasts, RBA Governor Michele Bullock remains cautious and has not confirmed any immediate rate cuts.

FAQ

Yes, NAB expects up to 100bps in cuts by August 2025, with further reductions through early 2026.

A drop in inflation, slower global growth, and domestic political stability support the case for cuts.

The official cash rate could fall from 4.10% to 2.60% by February 2026, according to NAB.

Lower Reserve Bank rates will reduce mortgage repayments, easing pressure on household budgets.

No official cuts have been announced yet. The RBA remains cautious amid global uncertainty.

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