Official interest rates are widely regarded to remain steady today but the credit crisis threatens to spur more independent rate rises by the big banks.
Banks have lifted interest rates independently of the Reserve Bank of Australia to cover the increasing costs for them to raise funds on global money markets, and HSBC Australia chief executive Stuart Davis expects this trend will continue.
The credit crisis, which is tied to US economic troubles, has made those global markets more expensive. But the chief executive at major US investment bank JPMorgan Chase believes that the American financial crisis will not end any time soon. "We can only speculate how deep and how long the recession in the US will really be and how that in turn will impact banks," JP Morgan's James Dimon said. "We are not done with the crisis for a long time."
HSBC Australia's Mr Davis believes that conditions in offshore capital markets have not improved significantly over the past two months and there was little doubt that more independent moves would be made. "There's no doubt. We saw a couple of banks move standard variable rates (recently) and there's going to be a least another one, if not another two of those over the next few months," he said.
CommSec chief equities economist, Craig James, said the banks would balance the impact of further independent rises on both customers and shareholders. "You can't continue to lift rates significantly if the other banks aren't doing the same because you'll lose market share," he said.
Mr James was among many analysts who believe the RBA will leave rates on hold when it meets today
Stock market investors would be encouraged if the RBA did leave the cash rate as it is because it would indicate recent rises had slowed the Australian economy. "That's something investors would love to see and hear because it means they can make decisions with greater certainty," he said.
Mr James said results this week from banking heavyweights National Australia Bank and St George would be crucial. "If we do get confirmation that the banking sector remains in good shape, despite some high profile casualties, again that's going to provide more comfort," he said.
Mr James said a combination of better-than-expected job figures from the US, and an increase in gold and oil prices, could give Australia's stock market a 40-point boost at today's outset. "The rally's going to continue on the Australian share-market," he said.