cash rate (1 Viewer)

[MMchen]

hi guys
iw as wondering if theres anybody here that can give me some understanding on how the RBA uses differences in cash rate to affect economic activity and more so.....how it affect interest rate?..

 

[timmii]

The cash rate *is* the official market interest rates. Raising interest rates raises the cost of borrowing ---> slows market activity. Lowering interest rates ----> raises aggregate demand. A lot also has to do with the 'annoucement effect" - i.e just by merely saying they're changing the rates they alter the public's perceptions of the market and thus their behaviour.

Argh that response is a bit brief, but cnnnn's on now...if u dont understand still, let me know

 

[krayziekarnevil]

A contractionary stance of monetary policy is adopted when the RBA intends to raise the cash rate. In other words a higher cash rate means lower economic growth.

Also, chnages in the short end of the yield curve are affected by changes in the cash rate, and interest rates at the long end will be influenced by the inflationary expectations.

On the other hand, the RBA would ease the stance on MP by buying CGS, thus increasing the supply of cash.

 

[MMchen]

ahehea.....alrite thanks guys...i thikn that should help me a little..
thanks for your time and effort in helping out...