the adviser logo

Banks will toe RBA line: AMP

by Staff Reporter10 minute read
The Adviser

Jessica Darnbrough

The Reserve Bank's decision to leave rates on hold for the remainder of 2010 is unlikely to be undermined by out of cycle bank rate hikes.

At its monthly Board meeting yesterday, the RBA signalled that it is comfortable keeping interest rates on hold well into 2011, after weak consumer spending had the economy virtually stalling in the September quarter.

That said, the banks are continuing to fight against higher costs of funds, which could force them to once again move independently of the RBA.


Last month, all four of the majors lifted their respective standard variable rates above the RBA’s 25 basis point hike.

AMP’s chief economist Shane Oliver told The Adviser that after last month’s independent rate hikes, the banks were no longer burdened by the same level of funding pressure.

“My feeling is that the banks have largely recouped the increase in funding costs that they were complaining about, and therefore there is no extra pressure on them to move independently of the Reserve Bank,” Mr Oliver said.

“I think the banks will sit tight for an extended period and my best guess is that they will move in line with the Reserve Bank going forward.”

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more