National Australia Bank are sticking with their forecast for the first Reserve Bank of Australia rate cut at the May 2025 meeting, although acknowledge February is a possibility.
More from NAB's report:
Unemployment Outlook:
- Expected to peak at 4.3% before easing to 4.2% by 2026 as the economy stabilizes.
- Employment growth remains positive, with unemployment settling ~1ppt below pre-COVID levels.
Inflation Forecast:
- Q4 trimmed mean inflation: 0.6% quarter-on-quarter (q/q).
- Gradual easing of inflation expected, reaching:
- 2.7% by late 2025.
- Around 2.5% by early 2026 (mid-point of RBA’s target band).
RBA Interest Rates:
- December RBA pivot shifts risks toward an earlier rate cut (May still seen as the likely start).
- Upside risks to inflation are fading, allowing the RBA to focus on minimizing labor market slowdown.
- A February rate cut would depend on the RBA reassessing labor market and economic balance, with Q4 CPI data being key.
Economic Growth & Soft Landing:
- Outlook supports a soft landing, aided by:
- Slowing population growth.
- Improved household conditions.
- Risks remain:
- Business investment growth is slowing.
- Dwelling investment shows limited recovery.
- Consumption and private sector momentum require improvement.
NAB nominate the key data points in the lead-up to the February meeting:
- the monthly CPI indicator for November ... which is due on Wednesday 8 January 2025 at 11:30am Sydney time (0030 GMT, 1930 US Eastern time on Tuesday)
- the Q4 CPI ... Wednesday 29 January 2025 at 11:30am Sydney time (0030 GMT, 1930 US Eastern time on Tuesday)
- the Labour force survey for December ... due on Thursday 16 January 2025 at 11:30am Sydney time (0030 GMT, 1930 US Eastern time on Tuesday)
This article was written by Eamonn Sheridan at
www.forexlive.com.
