All eyes will be on ANZ tomorrow as the lender makes its first major assessment of the impact of funding costs on its mortgage rates.
Last month, ANZ's chief executive officer Philip Chronican said the bank had made the decision to announce future pricing changes for retail and small business variable interest rates on the second Friday of each month in favour of coinciding with with the RBA Board meetings.
Mr Chronican said with retail banking margins contracting and the cost of funds rising, the relationship between the cash rate and mortgage rates was now less relevant than pre-GFC.
"Bank funding costs are now largely unrelated to movements in the Reserve Bank's official cash rate," Mr Chronican said.
"This provides a measure of predictability for customers on when rate changes will occur and it provides us with the flexibility to reflect movements in funding costs across the full spectrum of funding sources – not solely in response to the Reserve Bank's cash rate."
Now one month after the last cash rate announcement, tomorrow is the first time ANZ will review its rates independently of the RBA.
While the major is widely expected to keep rates on hold, any movement could create a storm of controversy, especially as the competition for market share increases in its ferocity.
ANZ will also be mindful of the fact that investors are pricing in another interest rate cut by the Reserve Bank in February.
Such a move would make it three rate cuts in as many Board meetings – effectively heaping pressure on Australia’s lenders to stay in line, including ANZ.