ANZ chief economist Saul Eslake has warned that banks will not pass on any RBA reduction unless it comes at 50 basis points, The Australian Financial Review reports.
“If the [Reserve Bank] wants to prevent rates from going up it will need to cut by 25 basis points,” he said.
“If they judge that the deterioration in global financial conditions warrants a reduction in the rates borrowers are paying they will have to reduce by 50 basis points.”
Meanwhile federal treasurer Wayne Swan yesterday conceded that current financial conditions could make passing on a rate cut “complicated” for banks but he today described any reports that banks wouldn’t pass any official rate cut on as “incredible”.
“There is certainly a problem at the moment in terms of short-term costs for banks,” Mr Swan told ABC radio.
“But it is certainly not the case that the banks would be in the position where they would say they would not pass on any official rate cut at all.”
Financial crisis to keep lending rates high 01-10-08
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