NAB Economics has revised its rate forecast, with expectations the Reserve Bank Australia (RBA) will ease more quickly through mid-2025, taking the cash rate to 2.6% by February 2026.

The adjusted forecast sees the RBA cutting 50bps in May, followed by 25bps in July, August, November and February 2026.

In its updated Monetary Policy released today, NAB Economic Chief Economist Sally Auld said the downward shift in domestic and global growth since the RBA last met in early April meant a restrictive policy stance in Australia was no longer appropriate.

“Headwinds from the global environment have intensified, but error bounds around our forecast are large given uncertainty remains exceptionally elevated,” Dr Auld said.

“Our call for a 50bps easing in May reflects the fact that with the real cash rate of 1.3% and policy currently restrictive, the RBA needs to play catch up.

“Once the cash rate reaches a level more consistent with a neutral policy setting, we then expect the RBA to pause for a few months before taking the cash rate into modestly accommodative territory.”

NAB Economics has also revised its unemployment rate in the near term, and shaved growth for 2025, but Dr Auld said they expected a larger policy response was required to keep activity on track.

“A weaker global backdrop and the impacts of weaker consumer and business confidence have now shifted the distribution of risks away from a tighter labour market and towards the risk of a rise in the unemployment rate,” she said.

“We now see GDP growth of 2.0% over 2025 (was ~2.25%) and see the unemployment rate peaking slightly higher at around 4.4% before edging back down to around 4.25% at end 2026. “

Read the full Monetary Policy Update here.