No more rate cuts: Major lender says RBA has hands tied

Australians will have to wait more than eight months for any more cash rate cuts from the Reserve Bank, a big four bank has warned.

This is the latest forecast from National Australia Bank (NAB) after the Australian Bureau of Statistics last week revealed inflation was on the rise again. 

NAB – the country’s third-largest home loan lender – says it now expects the Reserve Bank will need to keep the cash rate at 3.6% through until May next year.

This marks a major change in thinking for NAB, which had previously priced in another cut in November.

In a monetary policy update this week, the bank said market services inflation is “significantly hotter than we expected” and is no longer aligned with Reserve Bank of Australia (RBA) forecasts.

The Consumer Price Index came in at 3.0% for last month, right at the top end of the bank’s 2-3% target range. The data also confirmed Australia is now experiencing the highest annual inflation rate in 13 months.

“For the RBA, this means considerably less certainty that inflation has settled near 2.5% and highlights the likelihood that it will take a period of modestly restrictive policy for inflation to settle,” NAB stated.

“We no longer see the RBA delivering 25 basis points cuts in November and February 2026. Our new profile for the cash rate sees policy on hold at 3.6% for an extended period.”

The Reserve Bank kicked off its long-awaited cutting cycle back in February and has since followed a consistent cut-hold-cut-hold pattern throughout 2025 while inflation risks have moderated.

Throughout the year, RBA governor Michele Bullock has cautioned against reliance on the monthly CPI figure, saying the bank has instead relied heavily on quarterly inflation data to make cash rate decisions – a view NAB disputes.

“We think the signal is too strong to ignore,” the bank stated. “This dynamic will be reflected in the quarterly inflation print.”

NAB suggests the RBA will now need to reconsider the implications of stronger growth momentum and the likelihood that core inflation will annualise at the top end of its 2.3% target range, if not outside it.

“A period of modestly restrictive policy will both necessary and sufficient to eventually force the trajectory of core inflation onto a path consistent with the RBA’s mandate,” NAB warned.

The monetary policy committee will meet at the start of next week and make the next decision on the cash rate on 30 September.

The Australian Stock Exchange RBA rate indicator shows markets have priced in just a 4% chance of a cut as of 24 September.

This article first appeared on Mortgage Choice and has been republished with permission.

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