NAB tips 2 percent cash rate by 2025

NAB's Alan Oster sees a rapid lift in interest rates by 2025 from the current 0.1%

NAB tips 2 percent cash rate by 2025
NAB tips 2 percent cash rate by 2025

The NAB chief economist Alan Oster tips the RBA will lift the cash rate to 2 percent by 2025 from the current 0.1 percent.

His forecast comes despite the official advisory from the central bank.

"They are still saying that they don't expect to see, on their central forecasts, rate rises until 2024.

"But if I'm reading between the lines, I'm saying they are opening themselves up, if the environment is sufficently strong, to start increasing rates in 2023.

"Probably late in the back end of 2023," he told the NAB podcast last week. 

"And I would still say that when they go they will go fairly quickly.

"So I would expect to see the first rate rise go from 10 basis points to 50 basis points and after that probably go 25 each quarter. 

"So within 12 to 18 months, I can see 2 percent compared to 0.1 percent at present.

"But that is in 2025," he concluded.

Oster's comments were made before National Australia Bank's latest monthly survey found that business conditions slid 12 points to 24 in June and business confidence fell 9 points to 11 given increasing coronavirus cases and lockdowns saw business confidence and conditions pull back from record highs last month.

After this month's RBA meeting the RBA governor Philip Lowe advised it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

"The bank's central scenario for the economy is that this condition will not be met before 2024," Dr Lowe said.

It had previously advised “2024 at the earliest.”

However the cash rate futures market for June 2023 rose to 0.53%, up from 0.44% prior to the RBA’s meeting, indicating that the market expects rate hikes before 2024.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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