National Australia Bank Ltd (NAB.AU) shares surged 6.67% in Thursday's trading session, following the bank's dramatic shift in its forecast for Reserve Bank of Australia (RBA) interest rate cuts. The stock's significant uptick reflects investors' positive reaction to NAB's revised economic outlook.

In a notable change of stance, NAB analysts now predict a much more aggressive rate-cutting cycle by the RBA. The bank expects the central bank to implement an outsized 50 basis point cut at its May 18 meeting, bringing the cash rate down from its current 4.10%. Following this initial move, NAB anticipates four additional 25 basis point cuts in July, August, November, and February, potentially lowering the cash rate to 2.6% by early next year.

This revised forecast suggests a more rapid easing of monetary policy than previously expected, which could have far-reaching implications for the Australian economy and the banking sector. For NAB, lower interest rates could potentially boost loan demand and support the housing market, although it may also pressure net interest margins. The market's strong positive reaction indicates that investors believe the potential benefits of this scenario outweigh the risks for NAB and other major Australian banks.