NAB has its money on another RBA interest rate drop

This month, the Reserve Bank slashed interest rates to a record low 1.75%, and major bank NAB are already predicting further action in the coming months, reported the Australian Broker.

Global head of research for global markets at NAB, Peter Jolly, said that while interest rates will likely remain stable for a time following the recent rate cut from the RBA, the near future may hold yet another reduction in rates for Aussies.  

“Having cut rates to 1.75%... our current forecast is that they will sit at 1.75% for a good period, but I think it’s very obvious to say that there is another risk that they may need to cut rates again,” he was quoted as saying.

The RBA board’s decision to cut rates at their May meeting - the first change to the official cash rate since May 2015 - came as a surprise to many economists, who had forecasted that interest rates would hold steady until later in the year.

RELATED: Home loan interest rates

NAB was the only one of the big four to predict the rate drop, and was also the first to pass on the 0.25% rate reduction to its home loan customers. Jolly commented that the RBA’s decision was justified in the current economic climate.

“It was not because the economy is trending down and needs help and needs resuscitation,” Jolly was quoted as saying, but rather, the cut was likely the result of an inflation number, that in the first quarter of this year “was basically the lowest on record in Australia.”

He suggested that just as this low inflation was probably the tipping point for the Reserve Bank’s decision to reduce rates in May, it would likely be the deciding factor in any future rate drop.

“Generally, we see interest rates staying quite low in Australia over the next few years,” he added.

With interest rates at an all time low and set to drop further, now is the perfect time to start thinking about borrowing. Head over to our home loans page to find yourself the best mortgage deal, and keep an eye on which lenders are passing on the rate cut to their customers with our naughty or nice table.