In a blow to mortgage holders, NAB made the bold move to delay its forecast for the first Reserve Bank of Australia (RBA) cash rate cut to May 2025 on the back of Wednesday's upside inflationary surprise.

Inflation rose 4.0% over the year to May, the Australian Bureau of Statistics (ABS) revealed, up from 3.6% in April and 3.5% in March.

The RBA aims to keep inflation in the band of 2% to 3% on an annual basis.

It has increased the cash rate 13 times since mid-2022 in an effort to do so.

NAB previously expected inflation to ease in the coming months, leading the RBA to lower the cash rate from its 12-year high of 4.35% in November.

"We now expect the RBA to remain on hold for longer, with a first rate cut now unlikely until May 2025," NAB Group chief economist Alan Oster said on Wednesday afternoon.

"From there we see a steady profile of one cut per quarter back to 3.10%, now reaching that point in mid-2026."

Mortgage holders around the nation will likely be disheartened by the news, as many struggle to meet their repayments in the high interest rate environment.

The latest figures from Roy Morgan show that nearly 30% of home loan borrowers are at risk of mortgage stress.

Mr Oster said that, while economic growth has slowed over the past 12 months, progress on inflation has failed to meet expectations.

The inflation read - the highest monthly rate since November 2023 - came on the back of what could be considered a hawkish turn from the RBA this month.

The board once again refused to rule anything in or out when it emerged from its June meeting, where it decided to hold the cash rate again.

However, some of its language appeared to signal less tolerance for still-stubborn price growth.

"The mix of slow growth and gradual progress on inflation reflects the RBA's decision to embrace a 'lower for longer' approach - a lower rate peak compared to other advanced economies, resulting in a longer period at that peak," Mr Oster said.

"It is possible the board will change course and raise rates at its August meeting … but with the labour market easing we don't believe their hand will be forced."

The shift in gears from NAB comes weeks after a similar about-face from ANZ.

Economists at the smallest of the big four banks pushed its forecast of a cash rate cut back from November 2024 to February 2025.

"It's not that monetary policy isn't working. It is," ANZ head of Australian economics Adam Boyton said at the time.

"However, getting an appropriate balance between the level of demand and supply is likely to take a little longer than expected."

CommBank and Westpac are still anticipating the RBA to drop the cash rate in November.

Experts at the former bank were shocked by the inflation read, having forecast a 3.7% annual increase, while those at the latter were on the money ahead of time.

Image courtesy of NAB