The rise in short term funding spreads and BBSW over the last month and into the end of financial year has been a major focus for the market (refer chart below). As was the case in the March quarter, there is some correction anticipated in July but funding margins above the RBA’s official cash rate are expected to remain elevated. As a result, the last week has seen some more (smaller bank) lenders review their lending rates due to the increased funding costs and to offset elevated term deposit competition. The major banks are on the sidelines for now.
The RBA meets again this week to discuss rates and is almost certain to leave the official cash rate unchanged, remaining positive on the economic outlook for a gradual pick-up in inflation and lower unemployment and despite risks from rising global trade tensions and higher domestic funding costs.