Australians with mortgages could have to wait another six months before seeing a rate drop, according to the National Australia Bank’s (NAB) most recent projection.
Though NAB had initially predicted the Reserve Bank of Australia (RBA) would cut interest rates in February 2025, now, that doesn’t seem like a possibility before May 2025, News.com.au reported.
“The labor market has been stronger than expected and the RBA remains concerned about upside risks to inflation should gradual labor market cooling stall and capacity growth remain sluggish,” NAB stated in its updated monetary policy published on Thursday.
With one rate cut every quarter, they anticipate a gradual rate reduction that will reach 3.10% by the middle of 2026. The surprising strength of the labor market and the RBA’s concerns about inflation risks are the main drivers of this updated view, NAB said in a statement.
The somewhat restrictive policy stance and the slow changes in the unemployment rate and inflation are responsible for the RBA’s cautious approach. It appears doubtful that there will be enough confidence in the trajectory of inflation with just two employment prints and one quarterly CPI announcement prior to the February meeting.
“On 30 September, we pulled our rate call forward to a first cut in February. We did that expecting an improving balance of risks around the inflation outlook would bring a rate cut into view sooner. While Q3 CPI data was as expected, we have been surprised by resilience in labor market indicators. It remains our view that the unemployment rate will rise a little further before stabilising around 4.5% in mid 2025, broadly in line with the RBA’s November forecast track,” the statement added.
