Commonwealth Bank of Australia (CBA) Chief Executive Ian Narev said on Thursday that the bank is not ruling out an independent interest rate cut if global financial conditions would improve.

However, he said that any such move in the short term is unlikely. CBA reported on Wednesday a 19 per cent rise in its first half net profit to $3.62 billion amid political debate on out-of-cycle rate increases made by the big four the past few days due to higher funding cost while the Reserve Bank of Australia (RBA) retained interest rate at 4.25 per cent.

"We certainly would consider that, I mean we're in a competitive market and therefore fundamentally we're making an assessment of both the competitive dynamic and the funding costs and in the appropriate circumstances we certainly would be willing to cut our rates," he told ABC News.

Mr Narev insisted that banks are not disregarding the RBA overnight cash rate decisions which is just one of the factors that determine lenders' funding costs. In fact, it seems the other way around as RBA Deputy Governor Philip Lowe said that it is banks' mortgage rates that influence the RBA monthly policy decision.

"Ultimately what we are doing is setting the cash rate to influence lending rates in the economy because that really matters when people make their savings and lending decisions," Mr Lowe said after a speech in Sydney.

He explained that the RBA sets monetary policy to take account of bank mortgage rates to get the right level of interest rates. He said the Australian central bank has been doing that for the past three years and will continue with that policy.

Mr Lowe said the RBA recognises the fact that the spreads which banks must pay have gone up which have an impact on the RBA setting the cash rate. He estimated that the current overnight cash rate of 4.25 per cent is a percentage point lower than it otherwise would have been if the spread widening that has affected banks' cost of funds did not happen.

In response to politicians' and the public's criticism that the lenders were unfairly passing on higher costs to borrowers and at the same time axing jobs or offshoring tasks, Mr Narev said that banks need to show a strong track record of profit growth in the interest of all its stakeholders.

He said the issue of interest rates is not a popularity contest, but Mr Narev conceded that lenders need to listen to all groups of stakeholders and balance their needs.

"We are a big institution with an important role to pay in the Australian economy, and therefore we expect and invite scrutiny," Mr Narev said.

One such role that CBA will play is to ensure steady employment by not declaring redundancy while the other large Australian lenders have announced major job cuts while raising interest rates to boost their profitability. Across the Australian banking industry, 7,000 jobs are expected to be shed in the next 12 months.

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