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RBA Glossary definition for cash rate target

cash rate target – As in most developed countries, the stance of monetary policy in Australia is expressed in terms of a target for an overnight interest rate. The rate used by the Reserve Bank of Australia is the cash rate (also known as the interbank overnight rate). When the Reserve Bank Board decides that a change in monetary policy should occur, it specifies a new target for the cash rate. A decision to ease policy is reflected in a new lower target for the cash rate, while a decision to tighten policy is reflected in a higher target.

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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BA-MARTIN in Detail

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
cash rate and banks' cost of funding increases as the cash rate falls. ... By cash rate level. The lending spreads banks charge above their costs of debt funding have historically been unrelated to the level of interest rates (see Graph 13 in Garner and
https://www.rba.gov.au/publications/rdp/2022/2022-01/ba-martin-in-detail.html

MARTIN Gets a Bank Account: Adding a Banking Sector to the RBA's Macroeconometric Model

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
In the RBA's macroeconometric model, known as MARTIN (Ballantyne et al 2019), the difference between banks' mortgage rates and the RBA's cash rate is treated as exogenous (i.e. ... With deposit rates unable to move below zero, cash rate reductions cause
https://www.rba.gov.au/publications/rdp/2022/2022-01/full.html

Conclusion

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
In extreme cases, it may be that a lower cash rate slows capital restoration by so much that banks' endogenous credit supply responses more than offset the macroeconomic effect of the ... cash rate cut.
https://www.rba.gov.au/publications/rdp/2022/2022-01/conclusion.html

Online Appendix

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
r. D. =. 0.05. %. ). as the cash rate falls, and an endogenous response to capital shortfalls. (. ... is treated as a random walk. r. C,t. is the cash rate.
https://www.rba.gov.au/publications/rdp/2022/2022-01/online-appendix.html

BA-MARTIN in a Nutshell

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
Therefore, the direct effects of interest rate changes on banks' profits can be decomposed into three components: changes in the cash rate, changes in banks' debt/deposit funding spreads and changes ... If losses are small and banks' capital is
https://www.rba.gov.au/publications/rdp/2022/2022-01/ba-martin-in-a-nutshell.html

How Does the Pass-through of Monetary Policy Change with the State of the Economy?

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
reduces lending rates by 25 basis points – irrespective of the level of the cash rate. ... Our focus is on the cash rate pass-through excluding unconventional policies that work through other interest rates.
https://www.rba.gov.au/publications/rdp/2022/2022-01/how-does-the-pass-through-of-monetary-policy-change-with-the-state-of-the-economy.html

How Might COVID-19 Have Affected the Banking Sector and What Feedback Would This Have Had on the Real Economy?

18 Jan 2022 RDP 2022-01
Anthony Brassil, Mike Major and Peter Rickards
In reality, monetary policy would respond by reducing the cash rate (or via unconventional policies), and it is likely that governments and APRA would also respond. ... reducing the cash rate by the same amount.
https://www.rba.gov.au/publications/rdp/2022/2022-01/how-might-covid-19-have-affected-the-banking-sector-and-what-feedback-would-this-have-had-on-the-real-economy.html