RBA expected big bank rate rises

The RBA this week released minutes of the its most recent meeting at which it decided to raise the cash rate by 0.25 of a percentage point to 4.75 per cent. The minutes revealed the RBA expected retail lending rates might increase by more than the cash rate.

The Commonwealth Bank immediately raised its standard variable mortgage rate 45 basis points to 7.81 per cent. ANZ raised its rate by 39 basis points to 7.8 per cent. National Australia Bank increased its standard variable mortgage rate 43 basis points to 7.67 per cent and Westpac lifted its rate 35 basis points to 7.86 per cent.

Reserve Bank deputy governor Ric Battellino said the banks had faced higher funding costs since the global financial crisis and needed to pass on these to consumers. Treasurer Wayne Swan and opposition treasury spokesman Joe Hockey have previously said banks were not justified in raising rates above the official increase this month.

Mr Battellino said the perception that banks' interest rates should move in alignment with the RBA cash rate had arisen in the 1990s and earlier this decade when financial markets were stable. But that had changed since the global crisis.

Source: The Australian