National Australia Bank (NAB) now expects the Reserve Bank of Australia (RBA) to begin easing monetary policy as early as May, forecasting a 50 basis point cut followed by a series of 25-point reductions through to February 2025.

If realised, the cash rate would fall to 2.6%, with clear implications for residential mortgage lending and borrower sentiment.

The revised forecast comes amid rising global uncertainty, following US President Donald Trump’s decision to pause proposed tariffs (excluding China), which had unsettled financial markets.

NAB economists stated that “a restrictive policy stance in Australia is no longer appropriate,” citing both international risks and signs of domestic economic softness.

Deutsche Bank and AMP have also updated their outlooks.

AMP’s Shane Oliver commented, “I think we will see a cut in May and there’s a good chance we will see several more cuts this year.”

A lower interest rate environment could improve serviceability, stimulate borrowing, and potentially reignite demand across both owner-occupier and investor segments.

Westpac and CBA, however, have maintained their existing forecasts, reflecting some divergence in expectations across the major banks.

While Australia’s direct exposure to the proposed tariffs is limited, the broader concern lies in reduced global demand, particularly from China, which may slow the pace of economic recovery.