In a shift that may offer some relief to mortgage holders, economists at the National Australia Bank now predict the next move in interest rates will be downward. However, they caution that the cut may not come until 2027.
Change in outlook
NAB's chief economist, Sally Auld, previously anticipated that the Reserve Bank would raise the cash rate at its August board meeting. The revised forecast reflects a sharper-than-expected economic slowdown in early 2026, which has prompted a reassessment of the monetary policy trajectory.
“We now see the next move as a cut, but it could be a year away,” Auld stated, tempering expectations for immediate relief.
Implications for borrowers
For homeowners, the news offers a glimmer of hope after a prolonged period of rising rates. However, the extended timeline means borrowers will need to brace for continued high borrowing costs for the foreseeable future.
The Reserve Bank has maintained a hawkish stance to combat inflation, but the weakening economic conditions may force a pivot. NAB's revised view aligns with other market signals suggesting that the central bank may have reached the peak of its tightening cycle.
“The economy is slowing more quickly than anticipated, which reduces the urgency for further rate hikes,” Auld explained. “Our updated analysis indicates that the next logical step is a cut, but patience will be required.”
