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Tight labour market to keep RBA on the sidelines for longer

Today’s unemployment print shows a tight labour market, and with the RBA still concerned about upside risks to inflation NAB has reverted to its earlier expectation for a first rate cut in May 2025, with a steady profile of one cut per quarter back to 3.1% by mid 2026. View the full report here.

Monetary Policy Update - NAB changes rate call to May

  • We revert to our earlier expectation for a first cut in May 2025. From there we continue to see a steady profile of one cut per quarter back to 3.10% by mid 2026.
  • The labour market has been stronger than expected and the RBA remains concerned about upside risks to inflation should gradual labour market cooling stall and capacity growth remain sluggish.
  • There are only two more employment prints and one quarterly CPI before the February 18 meeting. Given the data flow to date, it now looks unlikely the RBA will have enough confidence in the trajectory of inflation by then. There is a real risk that policy rates stay on hold even deeper into 2025.
  • We continue to assess that the economy has moved substantially towards balance and that some modest further easing in the labour market and capacity pressures will be sufficient to bring inflation back to target.
  • While we expect rates will move lower over time, because the RBA’s policy stance is only modestly restrictive there is little urgency to adjust policy settings while both inflation and the unemployment rate are evolving gradually.
  • RBA policy had diverged from peer central banks that moved policy deeper into restrictive settings. As other central banks have moved to cut rates, that divergence is narrowing. For Australia, the cutting phase will be later and ultimately shallower.

For further detail, please see the attached document.

View report

 

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All prices and analysis at 14 November 2024.  This information has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). The content is distributed by WealthHub Securities Limited (WSL) (ABN 83 089 718 249)(AFSL No. 230704). WSL is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited (ABN 12 004 044 937)(AFSL No. 230686) (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer.  This material is intended to provide general advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.  Past performance is not a reliable indicator of future performance.  Any comments, suggestions or views presented do not reflect the views of WSL and/or NAB.  Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice including any third party sourced data (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable. For more information, please click here. 


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NAB Markets Research

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