NAB had been the outlier among the big banks in sticking with its May 2025 forecast for the RBA's first cut to the cash rate since interest rates began rising in May 2022.

But on Monday afternoon, the bank revised its outlook based on a "shifting balance of risks".

It now joins Westpac and ANZ in forecasting a February 2025 rate cut while Australia's largest bank, Commonwealth Bank, is sticking with December 2024.

The big four banks' cash rate forecasts are now as follows:

Bank First cut expected Number of cuts expected Revised cash rate
Commonwealth Bank December 2024 5 3.10%
Westpac February 2025 4 3.35%
NAB February 2025 5 3.10%
ANZ February 2025 3 3.6%

Five rate cuts to come

NAB economists now see a 25-basis point cut to the cash rate in February, with three more cuts of the same size each quarter during 2025.

They expect the cash rate to undergo one more 25-basis point cut in the first quarter of 2026 to 3.1%.

NAB said the change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than it expected.

It said the RBA cuts would be later and shallower than central banks in other countries, many of which have begun their cutting cycles.

Economic outlook

NAB said the adjustment to its cut schedule doesn't come with material shifts to its other forecasts.

It still expects the first half of 2024 will mark the trough in economic growth while the unemployment rate will rise marginally before stabilising at around 4.5%.

It says elevated inflation is being sustained by housing and price pressures around labour and other non-labour costs.

However, NAB economists expect cost drivers to fade while soft growth in demand will ease the pressure on consumer prices.

They're expecting underlying CPI inflation of 2.6% during 2025.

Inflation in 'target range' in 2025

The RBA has repeatedly said it won't cut the cash rate until underlying inflation is "sustainably" within its 2-3% target range.

It does not forecast this until the end of 2026. 

Last week, the monthly CPI indicator for August was 2.7%, its lowest level in three years and a hefty 0.8% lower than the July figure of 3.5%, largely on the back of government energy rebates.

However, the RBA will be looking to its preferred quarterly trimmed mean inflation figure, which excludes volatile or one-off items.

The next quarterly CPI data is due on 30 October, the week before the RBA's next meeting.

The next RBA decision on the cash rate is scheduled to be delivered on Tuesday 5 November, Melbourne Cup Day.

November is historically a popular month to move, with just over one-in-seven (14.7%) of all moves since 1990 occurring in that month.

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