PERTH—Official interest rates should have risen to 4.5 per cent by this time next year, Commonwealth Bank of Australia chief executive Ralph Norris says.
Mr Norris also said Australia's biggest lender could increase rates beyond the Reserve Bank's cash rate.
"I think it is fair to say that over the passage of the next 12 months, the rate will probably get back to somewhere around 4.5 per cent," Mr Norris told reporters after the bank's annual general meeting in Perth on Wednesday.
"Certainly, I think that it has been made very clear by the federal government and the Reserve Bank that the three per cent setting was very much an emergency setting for what was expected to be a significantly tougher environment here in Australia than it has actually panned out to be."
Mr Norris said 4.5 per cent was the "Goldilocks setting, neither too hot or too cold".
He said he did not rule out the Commonwealth Bank lifting interest rates beyond the official rate.
"I can't rule that out and it is dependant on what the cost of funding is, and that's obviously based around cost of retail funding and also the cost of wholesale and international funding.
"There is no doubt that the cost of funding has continued to rise."
The Reserve Bank lifted the cash rate by 0.25 per cent in October and again in November to 3.5 per cent presently.
At three per cent, the cash rate was at a 49 year low.