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CBA Chief Refuses To Rule Out Rate Hikes Beyond Official Increases
Australian banking major, Commonwealth Bank of Australia has said it cannot rule out increasing its interest rates above an increase in official interest rates by the Reserve Bank of Australia.
Australia’s largest lender says the central bank will continue its policy of tightening monetary policy, as it rightly tries to pre-empt inflationary pressures.
The Sydney based lender says it expects the official cash rate to be 100 basis points higher by this time next year.
Ralph Norris, CBA’s chief executive, says that inflation must be contained as Australia embarked on a period to which he referred to as a potential golden age.
“I think it is fair to say that over the passage of the next 12 months, the rate will probably get back to somewhere around 4.5 per cent,” Mr Norris told reporters after the bank’s annual general meeting in Perth on Wednesday.
“Certainly, I think that it has been made very clear by the federal government and the Reserve Bank that the three per cent setting was very much an emergency setting for what was expected to be a significantly tougher environment here in Australia than it has actually panned out to be.”
Official interest rates were eased to nearly half century lows of 3 per cent in April this year, as part of the central bank’s monetary response to the global financial crisis.
The Reserve Bank of Australia (RBA) began tightening official rates in October when it undertook a 25 basis point rate hike at the start of October followed by another increase at the start of November.
The Official cash rate currently stands at 3.5 per cent.
Mr. Norris refused to rule out whether CBA would lift rates beyond any increase in official interest rates.
“I can’t rule that out and it is dependent on what the cost of funding is and that’s obviously based around cost of retail funding and also the cost of wholesale and international funding.
“There is no doubt that the cost of funding has continued to rise.”
Mr. Norris said it was critical that the central bank maintained a keen eye on inflation within the Australian economy and said: “particularly as the Australian economy looks poised to be on the verge of a golden age into the future”.
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