More interest rate cuts 'are likely'

Despite the fact the Reserve Bank of Australia (RBA) surprised everyone by sanctioning a 0.5 per cent cut to interest rates this week, some financial experts feel this still may not be sufficient.

Most economists were expecting a readjustment of 25 points, but the RBA saw fit to go further than this.

Chief financial officer at ING Direct Glenn Baker believes the decision to reduce the cash rate to 3.75 per cent "makes sense".

However, he added that the RBA must keep a close eye on how this affects the Australian economy and it should not be afraid to make even more reductions if the need arises.

"Given the low inflation climate we are in, there will be room to do more," Mr Baker commented.

"A further cut in the official cash rate is highly likely in coming months," he added.

Home and business loan customers will undoubtedly welcome lower interest rates, although people with term deposits will not be so keen on the idea.

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