Commonwealth Bank predicting major interest rate drop for millions of Australians with a mortgage

• Commonwealth Bank forecasting July rate cut

Australia's biggest bank is now forecasting a July interest rate cut as inflation continues to fall.

The Commonwealth Bank changed its forecast on Wednesday after new data showed inflation falling to just 2.1 per cent in May - putting it on the lower side of the Reserve Bank's two to three per cent target.

CBA has joined NAB in forecasting relief on July 8 when the RBA next meets.

The Reserve Bank had been expected to wait until August to cut rates again, following the late-July release of June quarter inflation data.

But Belinda Allen, a senior economist with the Commonwealth Bank, said the latest inflation data for May now made relief next month likely.

Back-to-back cuts are now expected in July and August to the existing 3.85 per cent cash rate.

'We expect the RBA to cut the cash rate in both July and August which would see the cash rate sit at 3.35 per cent,' she said.

Among the Big Four banks, CBA and NAB are now expecting a July rate cut while Westpac and ANZ aren't expecting more relief until August.

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