ANZ warns of another rate rise as cost pressure continues

ANZ Bank warned of more unilateral interest rate increases as funding markets remain fragile and could blow out again.

Phil Chronican, ANZ chief executive for Australia, blamed higher funding costs and warned that volatile markets remained hostage to the bailout of Greece.

ANZ's move to lift mortgage rates outside the Reserve Bank of Australia's cycle, after the RBA board decided to keep the cash rate at 4.25 per cent on Tuesday, followed its decision in December to make pricing decisions on the second Friday of each month.

The controversial move reflected the industry's long-held position that movements in deposit and wholesale funding costs were the main drivers of bank interest-rate policy, not the Reserve Bank's manipulation of the cash rate.

ANZ found support for its position on elevated funding costs in the Reserve Bank's quarterly statement on monetary policy, which was released yesterday.

It said bank debt markets were "particularly dislocated" in the latter part of last year, partly reflecting concerns about the European banking system.

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