NAB and Commonwealth Bank economists are both no longer forecasting further interest rate cuts from the RBA. (Source: Getty/AAP)
Major bank NAB is warning mortgage holders the interest rate cut cycle is well and truly over. The Big Four bank has now joined Commonwealth Bank in predicting the RBA will remain on hold at 3.60 per cent for an “extended period”.
NAB has scrapped its previous forecast for a final 0.25 per cent cut in May 2026. It expects underlying inflation will print above 3 per cent in the “near term” and will remain above target for at least another 12 months.
NAB economists said growth had accelerated and there was “little to no spare capacity in the economy”. House price growth and investor lending have also accelerated.
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They said this meant the “appropriate stance” for the RBA would be to remain broadly around neutral in its policy settings for the time being.
“We no longer expect the RBA to make a final cash rate cut in May 2026. We now see the cash rate on hold at 3.6 per cent for an extended period,” NAB economists Sally Auld, Gareth Spence and Taylor Nugent said.
They noted an earlier-than-expected resumption of disinflation, along with evidence of a weakening labour market, may bring further rate cuts “back into play” at a later date.
The revelation comes after the unemployment rate fell to 4.3 per cent, unwinding a previous spike to 4.5 per cent in September.
About 42,000 jobs were added to the economy in October, which was above economists’ forecasts of a rise of 20,000. The number of unemployed people dropped by 17,000.
Commonwealth Bank economist Harry Ottley said the data would likely affirm the RBA’s view that the labour market remains “a little tight” and reinforced the major bank’s view that interest rates would be on hold for the foreseeable future.
“We do not expect the labour market to loosen much further and expect the cash rate to remain on hold at 3.6 per cent in 2026,” Ottley said.
The bank ditched its previous expectation of a February 2026 cut following September’s inflation figures, where trimmed mean inflation rose to 3 per cent and headline inflation to 3.2 per cent.
The RBA’s latest economic forecasts see the unemployment rate remaining stable at 4.4 per cent for the foreseeable future.
VanEck head of investments and capital markets Russel Chessel also thinks we could be at the end of the rate cutting cycle.
“Pending any unforeseen macroeconomic or geopolitical incidents, there is a chance we may already be at the terminal rate for the current interest rate cycle, leaving the cash rate at 3.6 per cent for the foreseeable future,” he said.
KPMG senior economist Terry Rawnsley said the figures weren’t good news for mortgage holders and together with the recent jump in core inflation would “continue to encourage the Reserve Bank to keep interest rates steady”.
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