Banks to hold on to rate rises

09/09/08
Banks to hold on to rate rises

Banks will not readily reduce back the additional rate rises they have added on to official rate rises this year says the Reserve Bank governor Glenn Stevens.
Banks have raised their mortgage rates by about 0.5 per cent independent of moves by the Reserve to adjust the official cash rate in response to rising costs on global debt markets.
Stevens said costs for banks were still high. "Frankly, I think it is unlikely that banks will volunteer reductions in loan rates independent of the Reserve Bank lowering the cash rate," he said.
The increase in funding costs "hasn't gone away, but it's just not getting worse", he said.
Stevens said the economy was likely to slow to 2 per cent growth early next year and the board would seek a gradual easing in monetary policy with decisions made on a month by month basis.
Stevens said the two rate rises in February and March this year were necessary to avoid a blowout in inflation.

Source: Sydney Morning Herald