In a notable shift, one of Australia's major banks, NAB, has revised its cash rate predictions for February, mirroring the stance taken by its counterparts. Previously advocating for a 0.25 percentage point hike, NAB now joins the consensus of the other three major banks in predicting a hold, suggesting that the current cash rate of 4.35 per cent may be the apex of the current cycle.
NAB's earlier projection of the peak of the cash rate cycle at 4.6 per cent had set it apart from its competitors. However, the recent adjustment indicates a convergence of opinions within the banking sector, reinforcing the belief that the current rate could be the pinnacle.
Looking ahead to 2024, economic teams across all major banks anticipate a shift in the Reserve Bank of Australia's (RBA) strategy, with the possibility of rate cuts - a significant departure from the status quo since the November monetary policy meeting in 2011.
NAB and ANZ project a single rate cut in 2024, slated for the fourth quarter, with NAB specifically pinpointing the November cash rate meeting as the likely occasion for this adjustment. Westpac, on the other hand, foresees two cash rate cuts, the first expected in August 2024. The Commonwealth Bank of Australia (CBA) takes an even more dovish stance, anticipating a total of three cash rate cuts (75 basis points) for 2024, starting in September.
Several factors are poised to influence the RBA's decision-making process. NAB's recent adjustment coincides with the release of the Australian Bureau of Statistics' (ABS) monthly inflation figures, indicating a 4.3 per cent rise in the 12 months to November 2023. While a slight dip from the 4.9 per cent rise in October, this marks the smallest annual increase since January 2022.
CBA economist Stephen Wu had highlighted the significance of the November Consumer Price Index (CPI) data, terming it the "first of two critical inflation prints" leading up to the RBA's 5–6 February monetary policy meeting. The subdued November CPI figures, as analyzed by experts like Catherine Birch, seem to affirm the major banks' collective stance of no cash rate change in February.
Birch suggested that the October and November CPI prints may make it challenging for the fourth-quarter CPI inflation to exceed the Reserve Bank of Australia's forecast of 1 per cent quarter-on-quarter. Looking ahead, she anticipates the quarterly CPI to align with the RBA's 2–3 per cent target band in the second half of the year, potentially opening the door for a shallow easing cycle to commence in late 2024.
As economic indicators continue to shape the monetary landscape, Australian banks are closely monitoring these developments, providing a nuanced outlook for the nation's financial future.