National Australia Bank has revised its interest rate outlook, as signs of economic improvement start to emerge.
According to NAB’s Monthly Business Survey, the bank now expects the Reserve Bank of Australia (RBA) to cut the official cash rate by 50 basis points this year, taking the rate to 2.5 per cent by year’s end.
“This reflects the RBA’s comfort with current activity and suggests previous rate cuts have gained traction in both the housing markets and retail,” NAB’s chief economist Alan Oster said.
“While there are signs of improvement, the Australian economic outlook is still subdued, which will encourage the RBA to cut rates down the track.”
This new forecast differs slightly from NAB’s January forecast in which the bank said it expected to see the RBA cut 75 basis points from the cash rate in 2013, taking the official rate to just 2.25 per cent as early as September.
In a statement released in January this year, NAB said it expected to see the first interest rate cut to occur in the first quarter of 2013.
“Thereafter, we expect the RBA to wait to see the impact of recent policy moves but will need to react further by mid-year. We have tentatively put further cuts in May and August.
“We now expect a terminal cash rate of 2.25 per cent in the September quarter of this year,” the statement read.