The central bank is projected to maintain current rates during its meeting next month, but Westpac predicts a 0.25 per cent reduction in August, followed by another in November.

A lower inflation outlook is today giving the big four bank the confidence to call another two cuts of 0.25 per cent early next year.

Westpac Group Chief Economist Luci Ellis suggested subsequent cuts could occur in February and May, though they might happen as soon as December if inflation at 2.4 per cent and the labor market perform below expectations.

It would bring the current 3.85 per cent cash rate down to 2.85 per cent, which Ellis said was the “lower end of the neutral range”, for the first time since November 2022.

“It is possible that some of these cuts come a bit faster than the ‘cautious’ path we currently have pencilled in,” Ellis said.

“This will depend on the evolving data flow, particularly for the labour market and inflation, as well as the RBA’s evolving beliefs about what constitutes full employment.”

Ellis, however, warned that the Reserve Bank is not known to rush rate cuts and instead has a preference to move cautiously and predictably.

“This is code for not wanting to do back-to-back cuts,” he said. 

Westpac has the most optimistic cash rate forecast of the big four banks.

NAB is forecasting three cuts, while the Commonwealth Bank and ANZ predict a more moderate two.

Three out of four of the banks are predicting the next cut to come in August, with NAB deviating with a July prediction.

If Westpac’s forecast of four rate cuts is correct, Canstar estimates homeowners with a $600,000 loan to see a $349 drop in monthly repayments.

“This would be a huge relief for households under pressure, however, borrowers should remember this is a forecast, rather than a given,” Canstar Data Insights director Sally Tindall said.

“While the timing of the next cut is still up in the air, the prospect of at least one more is, at this stage, likely.”