As recently as Monday, NAB forecast the cash rate would fall to 2.6% by early 2026 – but that prediction has now been walked back.
This followed the central bank's decision to cut by 25 basis points (bp) – half the 50bp cut NAB had anticipated and one the RBA board did consider.
NAB now expects the RBA to deliver 25bp cuts in July, August, and November, bringing the cash rate to a new forecast low of 3.1%.
That's half a percentage point higher than previously expected, with the bank now believing the cycle will bottom out in November 2025 instead of February 2026.
See also: NAB to drop home loan interest rates following RBA cut
Dovish RBA shift and easing global risks prompt NAB rethink
"We have pared the pace and depth of easing relative to our previous forecast in recognition that the headwinds from the global backdrop, while still material, have eased," NAB group chief economist Sally Auld and senior markets economist Taylor Nugent said.
NAB's previous forecast was released around the time US President Donald Trump shocked markets with significant import tariffs, before opting to pause their implementation in April.
"Uncertainty remains elevated, and so it is possible that any re-escalation would weigh on both growth and inflation in Australia, and result in an assessment that stimulatory policy may be required," Ms Auld and Mr Nugent continued.
Tuesday's cut came with a subtle but meaningful shift in the RBA's tone.
The final line of the post-meeting statement moved away from a singular focus on inflation, instead highlighting both sides of the central bank's dual mandate: Consumer price stability (i.e. inflation) and full employment.
This apparently dovish evolution was paired with slightly revised forecasts in the RBA's quarterly Statement on Monetary Policy (SoMP).
The RBA now expects:
- Trimmed mean inflation to settle at 2.6% – down from its previous forecast of 2.7% and closer to the midpoint of its targeted 2% to 3% band
- Unemployment to stabilise at 4.3% – up from its previous forecast of 4.2%
- GDP growth in 2025 revised down to 2.1% – down from its previous forecast of 2.4%
"Forecast changes in the quarterly SoMP were modest but generally consistent with a dovish bias," Ms Auld and Mr Nugent said.
ANZ & CommBank also alter RBA predictions
NAB joins ANZ in downgrading its forecast for the number of RBA rate cuts to be handed down in the near future.
The smallest of the big four banks scrapped predictions of a rate cut in July on Friday.
According to ANZ economists, Aussie borrowers will see another 2025 cut in August, while a cut in February 2026 is also on the cards.
CommBank also adjusted its outlook for the RBA on the back of Tuesday's cut.
The nation's biggest bank now tips its two forecasted rate cuts to come sooner – in August and September rather than August and November – while the July meeting is expected to be 'live'.
"The risk sits with the RBA delivering an additional rate cut this cycle, or an earlier rate cut in July to ensure inflation continues to hit the mid‑point of the target and doesn't undershoot," CommBank senior economist Belinda Allen said on Tuesday evening.
"The total easing this cycle from 4.35% to 3.35% takes the cash rate closer to neutral.
"If the global situation deteriorates there is the risk the RBA might have to take the cash rate into slightly stimulatory territory."
Westpac stands alone among the big four, holding steady on its RBA outlook.
Chief economist Luci Ellis reaffirmed the bank's forecast for cuts in August and November, taking the cash rate to 3.35% by year's end.
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