RBA Cash Rate
Official Cash Rate
The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank of Australia to meet the inflation target specified in the Policy Targets Agreement. The current agreement defines price stability as annual increases in the Consumers Price Index (CPI) of between 2 and 3 per cent on average over the medium term. A media release is issued at 2.30 pm after each Reserve
Bank Board meeting, with the Board's decision taking effect the following day. Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks. What the OCR does
The OCR influences the price of borrowing money in Australia and provides the RBA with a means of influencing the level of economic activity and inflation. An OCR is a fairly conventional tool by international standards. In the past, the Reserve Bank used a variety of tools to influence inflation, including influencing the supply of money and signalling desired monetary conditions to the financial markets. Such mechanisms were more indirect, more difficult to understand, and less conventional.
How the OCR works
Most registered banks hold settlement accounts at the Reserve Bank, which are used to settle obligations with each other at the end of the day. For example, if you write out a cheque or make an EFT-POS payment, the money is paid by your bank to the bank of the recipient. Many hundreds of thousands of such transactions are made every day. The Bank pays interest on settlement account balances, and charges interest on overnight borrowing, at rates related to the
OCR. The most crucial part of the system is the fact that the Reserve Bank sets no limit on the amount of cash it will borrow or lend at rates related to the OCR.
As a result, market interest rates are generally held around the Reserve Bank’s OCR level. The practical result, over time, is that when market interest rates increase, people are inclined to spend less on goods
The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank of Australia to meet the inflation target specified in the Policy Targets Agreement. The current agreement defines price stability as annual increases in the Consumers Price Index (CPI) of between 2 and 3 per cent on average over the medium term. A media release is issued at 2.30 pm after each Reserve
Bank Board meeting, with the Board's decision taking effect the following day. Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks. What the OCR does
The OCR influences the price of borrowing money in Australia and provides the RBA with a means of influencing the level of economic activity and inflation. An OCR is a fairly conventional tool by international standards. In the past, the Reserve Bank used a variety of tools to influence inflation, including influencing the supply of money and signalling desired monetary conditions to the financial markets. Such mechanisms were more indirect, more difficult to understand, and less conventional.
How the OCR works
Most registered banks hold settlement accounts at the Reserve Bank, which are used to settle obligations with each other at the end of the day. For example, if you write out a cheque or make an EFT-POS payment, the money is paid by your bank to the bank of the recipient. Many hundreds of thousands of such transactions are made every day. The Bank pays interest on settlement account balances, and charges interest on overnight borrowing, at rates related to the
OCR. The most crucial part of the system is the fact that the Reserve Bank sets no limit on the amount of cash it will borrow or lend at rates related to the OCR.
As a result, market interest rates are generally held around the Reserve Bank’s OCR level. The practical result, over time, is that when market interest rates increase, people are inclined to spend less on goods