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Official cash rate
The official cash rate (OCR) is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the central bank charges on overnight loans between commercial banks. This allows the Reserve Bank of Australia and the Reserve Bank of New Zealand to adjust the interest rates that apply in each country's economy. The OCR cannot be changed by transactions between financial institutions as this does not change the supply of money, only its location. Only transfers between the central bank and an institution can affect the OCR.
As banks settle all inter-bank transfers overnight, the central bank can regulate the rate paid for cash by the sale or buy back of bonds and other government issued securities (these are known as domestic market operations). As the sale or purchase of bonds affects the supply of money, then the interest rate will change to reflect its availability. This system indirectly influences the term structure of interest rates in the whole economy. Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks. Under the Australian system the Reserve Bank of Australia issues its dealing intentions at the start of each day, and banks and other financial institutions will act prior to the actual rate being achieved.
The rate is set by the central banks regularly, usually every month in Australia and every six weeks in New Zealand and forms one of the main tools to manage monetary policy.
In Australia, the Cash Rate Target is set by the Reserve Bank of Australia (RBA) to influence the Interbank Overnight Cash Rate (Cash Rate) on unsecured loans between banks. This rate serves as a near risk-free benchmark rate (RFR) for the Australian dollar and is commonly referred to as AONIA in financial markets.
The Cash Rate, which represents the weighted average interest rate on overnight unsecured loans in the domestic interbank market, is a key tool for the RBA's monetary policy. It is used to guide interest rates across the economy and serves as a reference rate for Australian dollar overnight indexed swaps (OIS) and the ASX 30-day interbank cash rate futures contract.
Additionally, the Reserve Bank publishes the Cash Rate Total Return Index (TRI), which acts as a public benchmark reflecting the performance of an investment earning the Cash Rate, with reinvested interest, offering a near risk-free rate of return.
The RBA Board meets regularly, and following each meeting, a media release is issued at 2:30 pm Sydney Time announcing any changes to the Cash Rate Target, which take effect the next day. They meet eight time a year as of 2024 instead of 11 in prior years. Previously they would meet the first Tuesday of the month excluding January. For 2024 they will meet over two days every month excluding April, July and October.
The former RBA Governor Philip Lowe said "The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication,"
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Official cash rate
The official cash rate (OCR) is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the central bank charges on overnight loans between commercial banks. This allows the Reserve Bank of Australia and the Reserve Bank of New Zealand to adjust the interest rates that apply in each country's economy. The OCR cannot be changed by transactions between financial institutions as this does not change the supply of money, only its location. Only transfers between the central bank and an institution can affect the OCR.
As banks settle all inter-bank transfers overnight, the central bank can regulate the rate paid for cash by the sale or buy back of bonds and other government issued securities (these are known as domestic market operations). As the sale or purchase of bonds affects the supply of money, then the interest rate will change to reflect its availability. This system indirectly influences the term structure of interest rates in the whole economy. Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks. Under the Australian system the Reserve Bank of Australia issues its dealing intentions at the start of each day, and banks and other financial institutions will act prior to the actual rate being achieved.
The rate is set by the central banks regularly, usually every month in Australia and every six weeks in New Zealand and forms one of the main tools to manage monetary policy.
In Australia, the Cash Rate Target is set by the Reserve Bank of Australia (RBA) to influence the Interbank Overnight Cash Rate (Cash Rate) on unsecured loans between banks. This rate serves as a near risk-free benchmark rate (RFR) for the Australian dollar and is commonly referred to as AONIA in financial markets.
The Cash Rate, which represents the weighted average interest rate on overnight unsecured loans in the domestic interbank market, is a key tool for the RBA's monetary policy. It is used to guide interest rates across the economy and serves as a reference rate for Australian dollar overnight indexed swaps (OIS) and the ASX 30-day interbank cash rate futures contract.
Additionally, the Reserve Bank publishes the Cash Rate Total Return Index (TRI), which acts as a public benchmark reflecting the performance of an investment earning the Cash Rate, with reinvested interest, offering a near risk-free rate of return.
The RBA Board meets regularly, and following each meeting, a media release is issued at 2:30 pm Sydney Time announcing any changes to the Cash Rate Target, which take effect the next day. They meet eight time a year as of 2024 instead of 11 in prior years. Previously they would meet the first Tuesday of the month excluding January. For 2024 they will meet over two days every month excluding April, July and October.
The former RBA Governor Philip Lowe said "The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication,"