How likely is NAB's 50 basis point rate cut forecast?

One major Australian bank has predicted a supersized rate cut will be delivered this month. 

The Reserve Bank of Australia (RBA) is scheduled to meet on 19-20 May. Many Australians have been wondering what their next move will be regarding interest rates.

NAB's reaffirms its forecast

On 10 April, National Australia Bank (ASX: NAB) predicted the RBA will cut the official cash rate by 50 basis points later this month.

In that update, NAB's Chief Economist Sally Auld predicted 100 basis points in total by August, and more to come by the end of the year. Auld suggested the RBA will cut by 50 bps in May, followed by 25 bps in July, August, November, and February. This trajectory would take the official cash rate from 4.10% to 3.10% by August, and 2.6% in February 2026. An estimated $526 would be shaved off monthly payments on the average $600,000 loan, according to Yahoo Finance. 

On 5 May, NAB released another update, reaffirming their prediction of a 50 basis point rate cut this month. However, NAB's Chief Economist Sally Auld suggested this outcome was conditional on the RBA shifting its thinking in two key areas. Specifically, she said there would need to be:

First, an acknowledgement that risks to inflation are no longer balanced, but rather, biased to the downside as a consequence of trade diversion and weaker global growth…Second, a shift in mindset towards a less cautious approach to their policy strategy; that is, a willingness to act quickly and boldly.

In February 2025, the RBA delivered its first rate cut since November 2020, slashing the official cash rate by 25 basis points. 

Last week, Bendigo and Adelaide Bank Ltd (ASX: BEN) also suggested that four more rate cuts were on the way this year. 

A 50 basis point rate cut would mirror the relief given by the US Federal Reserve in September 2024. 

Who would benefit?

Should NAB's forecast materialise, it would benefit homeowners across Australia, who have battled higher living costs and interest rates over the past few years. 

Nearly 45% of Australians have a mortgage, according to a 2024 Infochoice Survey.

Consumer discretionary stocks such as Bunnings owner Wesfarmers Ltd (ASX: WES), electronics retailer JB Hi-Fi (ASX: JBH), and online furniture retailer Temple & Webster (ASX: TPW) would also be likely to get a boost. With less going to the mortgage, consumers would have more funds to spend at their favourite retail stores.