The Commonwealth Bank has revised its cash rate forecasts lower, with the nation’s largest bank tipping an unprecedented fall to 1.25% by the end of the year.

 

The new projection from CBA’s chief economist Michael Blythe comes in the wake of the Reserve Bank reducing the cash rate to 1.75% and predicting a weaker outlook for inflation.

 

Blythe said the revision to CBA’s earlier forecasts — it had tipped rates to fall one more time this year, after the RBA cut on 3 May — comes due to the central bank’s inflation projections hinting at “a greater level of concern than was appreciated at the time”.

 

“The low CPI print shocked the RBA and contributed to a fundamental reassessment on how policymakers are thinking about inflation,” he says.

 

“The level of RBA concern is such that we feel obliged to add another cut to our cash rate profile (in November) following the one already penciled for August.”