Search: Cash Rate
RBA Glossary definition for Cash Rate
Cash Rate – The interest rate which banks pay to borrow funds from other banks in the money market on an overnight basis. The cash rate is the Reserve Bank of Australia's operational target for the implementation of monetary policy. It is also an important financial benchmark in the Australian financial markets. It is used as the reference rate for Australian dollar Overnight Indexed Swaps (OIS) and the ASX 30 Day Interbank Cash Rate Futures. The Reserve Bank of Australia is the administrator of the cash rate. The cash rate is calculated as the weighted average interest rate on overnight unsecured loans between banks settled in the Reserve Bank Information and Transfer System (RITS). The Cash Rate is also known by the acronym AONIA in financial markets.
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Appendix A: Pass-through Lower Bound in BA-MARTIN
21 Dec 2022
RDP
2022-08
And with credit demand only directly responding to cash rate changes via the resulting change in lending rates, zero pass-through would also mute the effect of cash rate changes on ... λ. parameter in BA-MARTIN) if lending rates remaining constant
https://www.rba.gov.au/publications/rdp/2022/2022-08/appendix-a.html
The Consequences of Low Interest Rates for the Australian Banking Sector
21 Dec 2022
RDP
2022-08
Figure 8: Cash Rate Pass-through to Banks' Lending Rates. Source: Brassil, Major and Rickards (2022). ... rate. So cash rate reductions remain an effective policy tool during large downturns and at low interest rates.
https://www.rba.gov.au/publications/rdp/2022/2022-08/full.html
Introduction
21 Dec 2022
RDP
2022-08
Holding lending rates constant following a cash rate reduction would therefore prevent any NIM reduction and would prevent any change to credit demand; if zero pass-through is enough to prevent ... a risk premium increase). If this risk premium increase
https://www.rba.gov.au/publications/rdp/2022/2022-08/introduction.html
References
21 Dec 2022
RDP
2022-08
Saunders T (2022), ‘Part 2 of 2: How High Could the RBA Take the Cash Rate? ... Available at
https://www.rba.gov.au/publications/rdp/2022/2022-08/references.html
Non-technical summary for ‘The Rise in Household Liquidity’
21 Dec 2022
RDP
2022-08
A corollary of this finding is that the extent to which cash rate changes were passed through to lending rates in Australia may have been more muted than what would be ... lending rates, such that policy rate reductions become counterproductive.
https://www.rba.gov.au/publications/rdp/2022/2022-08/non-technical-summary.html
The Literature through the Lens of Banks' Balance Sheets
21 Dec 2022
RDP
2022-08
Once these rates hit the ELB, any further reductions in the cash rate will not be passed through to these accounts. ... As a result, the lower pass-through of monetary policy to retail deposit rates lowers the net income from holding central bank
https://www.rba.gov.au/publications/rdp/2022/2022-08/the-literature-through-the-lens-of-banks-balance-sheets.html
Investigating the ‘Reversal Rate’ in Australia
21 Dec 2022
RDP
2022-08
in Section 4 is not operational) but that they still have a capital shortfall when the cash rate is reduced further. ... responses more than offset the reductions in r. D,t. that come from cash rate reductions at low interest rates?
https://www.rba.gov.au/publications/rdp/2022/2022-08/investigating-the-reversal-rate-in-australia.html
Conclusions, Policy Implications and Future Research
21 Dec 2022
RDP
2022-08
The flip side to this is that the pass-through of cash rate changes to lending rates may have been more muted than what the literature would predict. ... And pass-through would likely remain at similar levels were the cash rate reduced to the small
https://www.rba.gov.au/publications/rdp/2022/2022-08/conclusions-policy-implications-and-future-research.html
The Pass-through of Monetary Policy at Low Interest Rates
21 Dec 2022
RDP
2022-08
Figure 8: Cash Rate Pass-through to Banks' Lending Rates. Source: Brassil, Major and Rickards (2022). ... rate. So cash rate reductions remain an effective policy tool during large downturns and at low interest rates.
https://www.rba.gov.au/publications/rdp/2022/2022-08/the-pass-through-of-monetary-policy-at-low-interest-rates.html