The bank, the last to weigh in, made the call on Thursday, following this week’s consumer price index (CPI) data.
In a policy update, the big four bank reminded that it has maintained, since June, that the RBA would cut rates by 75 to 100 basis points in 2025, likely starting in February or May.
While initially advocating for the RBA to wait for more data on the labour market and household spending, NAB said it now believes the RBA will opt to begin its first rate cut in February.
“While we still see value in waiting, the pivot in the RBA’s communication in December, confirmation of weaker-than-forecast CPI outcome for Q4 and a softer outlook for the housing components of inflation, alongside further encouraging progress on market services, means that we think the RBA will now make the first cut in February,” the bank’s economists said.
But the bank stressed that despite pulling the call forward, it still expects a gradual easing phase.
“While the board is likely to have gained confidence that inflation will sustainably return to target as soon as late 2025, the labour market remains resilient, and there is some risk of retightening, with growth still expected to pick-up this year,” NAB said.
Data from the Australian Bureau of Statistics on Wednesday revealed a sizeable drop in both the headline and trimmed mean CPI prints, beyond market consensus of 2.5 per cent and 3.3 per cent, respectively.
Namely, CPI rose 0.2 per cent in the December quarter and 2.4 per cent annually, while trimmed mean inflation – which removes government subsidies from the equation – came in at 3.2 per cent, down from 3.6 per cent in the September quarter.
Half an hour after the CPI print was released, Westpac highlighted that the better-than-expected inflation data has shifted the balance of probabilities back in favour of a February rate cut.
The bank, which had previously pushed back its rate cut forecast to May in November, now believes there is “just enough” evidence to suggest disinflation is progressing faster than the RBA had anticipated. As a result, Westpac’s chief economist, Luci Ellis, stated that “the board will have the required confidence to begin the rate-cutting phase in February”.
Acknowledging the labour market’s surprising resilience, a matter viewed by some as a key deterrent to a February rate cut, the economist said: “In the end though, the good news on inflation beats the stronger news on the labour market.”
Similarly, on Wednesday, AMP, which switched to May from February for the first cut back in late November, announced, prompted by the CPI print, that it has once again revised its official forecast.
“We think the RBA will opt to cut the cash rate by 0.25 per cent at the February meeting, taking the cash rate to 4.1 per cent before another 0.25 per cent cut in May and another cut in the second half of the year,” said Diana Mousina, deputy chief economist.
Much like its banking peers, ANZ said the RBA will cut the cash rate by 25 basis points at its February meeting.
The big four bank had recently adjusted its rate forecasts, tipping that the central bank would cut in February instead of the earlier predicted May.
Commonwealth Bank was the only big four bank to stick with its forecast, having settled on a February rate cut back in October.
In its analysis of the CPI data, its economist Gareth Aird said: “We believe today’s data has given the green light for the RBA to commence normalising the cash rate at the February board meeting with a 25 bp rate cut.”
Aird assessed that Wednesday’s inflation print strengthens the belief that the “glide path” of returning underlying inflation to the target band has “gathered steam”.
“Our base case looks for 100 bp of easing over 2025 that would take the cash rate to 3.35 per cent,” Aird said.
“We have pencilled in one 25 bp rate cut per quarter over 2025.”
