National Australia Bank Ltd (ASX: NAB) shares are gaining slightly this morning following the bank's prediction the Reserve Bank of Australia (RBA) won't increase interest rates until 2024.
The NAB share price is currently trading at $26.35. That's 0.15% higher than yesterday's closing price.
For context, the S&P/ASX 200 Index (ASX: XJO) is also up today – it's gained 0.73% in early trade.
NAB is the only big bank predicting upcoming rate rise timings that are roughly in line with those of the RBA.
Let's take a look at NAB's prediction and how it stacks up against the other big banks'.
The latest from the Reserve Bank
The Reserve Bank of Australia (RBA) board met on Tuesday, at which time it decided to keep the cash rate at 0.1%. It expects to retain the record low rates until April 2024.
The RBA plans to lift rates when inflation is sustainable within the range of 2% to 3%. It believes for this to occur, wages growth will need to be more than 3% and unemployment levels will need to be less than 4%. RBA Governor Phillip Lowe said:
I want to make it clear that this focus on wages does not mean we have a target for wages growth or that wages growth necessarily has to have cleared a specific benchmark before we adjust interest rates… Yet even so, history teaches that sustained changes to the inflation rate are accompanied by sustained changes in growth in labour costs. So, over time, these 2 go together.
NAB's prediction roughly in line with RBA's
Yesterday, NAB group chief economist Alan Oster discussed the RBA's meeting. He said:
Reading between the lines, [the RBA is] opening [itself] up to start increasing rates in 2023, probably late in the backend of 2023… I would expect to see the first rate rise go from 10 basis points up to something like 50 basis points. Then, after that, probably [increase] 25 each quarter.
So, within 12 to 18 months I would expect to see a cash rate of 2% compared to 0.1% at present, but that's in 2025.
However, NAB director of economics Tapas Strickland was quoted by the Financial Review as saying:
It is conceivable… a rate hike could occur in late 2023, but that is a risk in our view and our central scenario is still 2024 for a hike.
3 of the big four disagree
The other big banks disagree with the predictions of both NAB and the RBA, believing a rate rise will occur sooner than late 2023 to early 2024.
As The Motley Fool reported yesterday, Commonwealth Bank of Australia (ASX: CBA) expects rates will rise in late 2022.
Westpac Banking Corp (ASX: WBC) is also bullish on an impending rate rise. It predicts rates will rise in the March quarter of 2023.
Finally, Australia New Zealand Banking Group Ltd (ASX: ANZ) is casting its stones a tad further, forecasting a rate rise in late 2023.
NAB share price snapshot
The NAB share price is performing well this year, gaining more than 16% since 2021 began.
It has also gained around 46% since this time last year.
