NAB Economics has updated its rate forecast, now expecting the RBA to cut the cash rate by 25bps in February.

In its latest Monetary Policy Update, NAB Economics said inflation easing more quickly than the RBA expected has set the scene for a February cut to the cash rate.

The latest data from the Australian Bureau of Statistics released this week showed a drop in underlying inflation from 3.5 per cent to 3.2 per cent in the December quarter.

“We now expect the RBA to cut the cash rate by 25bps in February,” NAB Group Chief Economist Alan Oster said.

“We still expect the cutting phase to be gradual, with the RBA taking the cash rate down to 3.1% by February 2026.

“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,” Mr Oster said.

Read the full Monetary Policy Update.