Key points

• We now expect the RBA to cut the cash rate by 25bps in February.
• We still expect the cutting phase to be gradual, with the RBA taking the cash rate down to 3.1% by February 2026.
• The Q4 CPI confirms that inflation has moderated more quickly than the RBA expected and sets up a likely downward revision to the inflation profile in the Feb SMP. This now makes February the most likely starting point for a gradual easing in interest rates.
• While the labour market remains strong, we do not see current conditions as inflationary. However, the RBA’s growing confidence will need to come in part from a reassessment of tightness in the labour market.

For further details, please see the NAB Monetary Policy Update (30 January 2025)