Decisions by the major banks to raise interest rates independently of the official cash rate does not suggest an undermining of monetary policy, according to a central bank representative.

Speaking at an economic forum in Sydney, Reserve Bank of Australia deputy governor Philip Lowe said the banks’ decisions on interest rates were not a major concern.

“The key question for us is, if the banks move independently of the Reserve Bank, whether that undermines the transmission mechanism of monetary policy,” he said.

“I think the answer to that is, it does not.

“It certainly throws sand in the wheels of the transmission mechanism, but there are other things that throw sand in the wheels as well.”

Dr Lowe said the position of the cash rate was still a central consideration for banks in setting their interest rates.

“There are certainly other factors that can influence lending rates as well, and from time to time they will have a more or less important influence,” he said.

“But we are confident that changes in the cash rate remain a very important influence.

“In setting monetary policy, we take account of what is going on with lending rates.

“The current level of the cash rate is at least 100 basis points lower than it would be if these widening in the margins had not taken place.”

On Tuesday, the Bank of Queensland announced that it had raised interest rates by 10 basis points, shortly after the RBA left official rates on hold at 4.25 per cent.

When the central bank held the cash rate last month, all the big four banks independently increased their interest rates.