Some dealers warned that government intervention to bring down lending rates could create an asset bubble similar to the sub-prime crisis in the US which triggered the global financial crisis.

"We could see the formation of an asset bubble as banks are compelled to lend without considering the risk factors, which market determined interest rates tend to do," a commercial bank dealer said speaking to the Island Financial Review.

"Interest rates tend to price credit after considering the risk factor. Lower the rate, lower the risk, so when lending rates are slashed through intervention it is paramount to asking banks to overlook risk factors when lending and this could be dangerous," the dealer said.

"Commercial banks would be exposed to a hit and profitability is no longer guaranteed. It would also take time for deposit rates to adjust fully," he said.

Dealers said as more borrow from the banking system on a flawed pricing structure, hence more the risk of an asset bubble forming.

There is also pressure on inflation.

"Especially if oil goes up to US$ 90 a barrel then we could probably see inflation picking up again followed by an increase in interest rates," a dealer said.

Some dealers are also expecting a further cut in policy rates.