ANZ says funding costs up, demand subdued, rates steady

ANZ released the results of its first monthly interest rate review on Friday, announcing that its rates for retail mortgages and small business lending would remain unchanged.

ANZ instituted a monthly rate review in December, in the midst of a heated public debate about whether banks should be free to set their rates based on their cost of funds or follow movements in the cash rate.

The monthly reviews are part of a move by the banks to break the link between the Reserve Bank's cash rate movements and bank rates.

ANZ will announce the results of its monthly review on the second Friday of each month.

ANZ's chief executive Australia, Phil Chronican, said in a statement that the bank hoped the monthly reviews would contribute to an "informed debate" about the composition of bank funding and the cost of funds from various sources.

Chronican said: "In coming to our decision this month we wanted to be clear that these higher interest rates we are now paying our depositors and the elevated prices we are required to pay for wholesale funds are going to be sustained.

"We also assessed our competitive position, the subdued state of credit demand and the overall state of the economy, and decided it was prudent to maintain our current rates at this time."