I will talk about how the Reserve Bank actually implements the target interest rate set by the Reserve Bank Board at its monthly meetings. I will then describe how this interest rate, known as the cash rate, affects all the other interest rates in the economy, including mortgage rates, business borrowing rates and deposit rates. So that affects you one way or another.
I will also talk about the Reserve Bank's transactions in the foreign exchange market and finish with some thoughts about the exchange rate more generally.
Tuesday, 26 February 2013
How the RBA maintains the cash rate
In an address to the University of Adelaide Business School (In The Reserve Bank's Operations in Financial Markets) Guy Debelle, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, explained how the RBA sets interest rates and deals with exchange rates: