At the time of posting (9pm Tuesday) the big four banks haven’t passed on the Reserve Bank’s reduction, and there’s talk, they won’t.
The European debt crisis has dried up credit markets, sending funding costs higher, and as I mentioned a few days ago (Bank downgrades > What they had hoped for?), Standard & Poor’s downgraded the credit ratings of Australia’s banks, which may further increases their borrowing costs.
Like I said then, I wouldn’t be surprised if that’s one of the reasons given by the banks as to why they won’t pass on the RBA cut in full.
Last month, NAB blamed the European crisis as one of the reasons for only passing a 20 basis point cut, but it could afford to. Even after that move, it has the lowest variable interest rate of the big four banks.
If the banks don’t move, then it’s even more of a reason for the RBA to move again early next year, after the board takes a holiday in January.
NAB today, brought forward its expectations for the next rate cut to February, joining Westpac and CommSec.
ANZ says a further modest easing in policy is likely, especially if global risks fail to improve.
You can watch my interview with Huw McKay from Westpac on Ricardo’s Business on SBS Online by clicking here.