Monetary Policy

The Reserve Bank is responsible for Australia's monetary policy. Monetary policy involves setting the interest rate on overnight loans in the money market (‘the cash rate’). The cash rate influences other interest rates in the economy, affecting the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation.

In determining monetary policy, the Bank has a duty to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. To achieve these statutory objectives, the Bank sets monetary policy to keep inflation in the economy to 2–3 per cent and employment at the maximum level that is consistent with maintaining low and stable inflation. These objectives in turn facilitate strong and sustainable growth in the economy over the longer term.