February 2010 Rate Rise Likely – What will the Banks do?

New inflation data has indicated that the Reserve Bank of Australia will most definitely raise rates at the February meeting. Some economists are predicting a 0.50% rat rise but the general consensus feel it will be 0.25%.

I have heard mixed reports as to what the banks will do. As stated in a earlier post that banks are still concerned about high funding costs. The RBA and other commentators suggest their is no need for the banks to raise rates beyond the RBA recommendation. We will just have to wait and see.

Access Economics have claimed that the major banks are likely to under cut the Reserve Banks reccomended interest rate increases as a PR campaign to win back customers. You can read the full story here.

I am never sure that the majors will miss a profit opportunity and coupled with reports of higher funding costs I think it is highly unlikely the majors will increase rates less than the Reserve Banks recommendation.