Don’t increase interest rates – RBA warns banks

With the official interest rate not rising, one concern for many property investors was that that banks would independently raise rates.

Yesterday the Reserve Bank effectively warned Australian banks today not to increase their key lending rates above official moves.

The Australian reports that “our central bank, which has raised official interest rates six times since October, emphasised that wholesale funding costs were unlikely to blow out in the next year.

In its quarterly Statement of Monetary Policy, the RBA said that while the price of wholesale funding had risen for the banks, the current costs were at the same point as one year ago.

It said if the current market conditions remained in place the banks’ funding costs would rise by just 5 basis points in the next 18 months.

The forecast effectively slaps down the banks’ constant arguments that funding costs remained volatile and could force interest rate rises outside of the official policy cycle.

“Recent increases in bond spreads are estimated to have had only a small effect on the major banks’ overall funding costs to date,” the RBA said.”


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