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cAShh rate!! (1 Viewer)
- Thread starter jky.
- Start date
kochou
Member
the heart of all interest rates
ameh
dirty trick
The cash rate is the lowest rate of interest and this is basically the ''mates rates'' in the overnight cash market, it's relatively easier to understand once you get an understanding of Domestic Market Operations which is in your Market Economy textbook or other books in the library if you bothered researching, alternatively you could go to the RBA which is probably the easier method.
There are two types of cash rate, official and unofficial, official being between authorised dealers and unofficial being those not authorised to deal with the RBA - correct me if I'm wrong. Anyway the commercial banks hold Exchange Settlement Accounts with the Reserve Bank and at the end of the day, exchanges of funds are either in a surplus or deficit because one individual say Jonny wants to cash a Westpac cheque at Commonwealth bank , Westpac will be in a deficit OR surplus at the end of the day as a result of millions of transfers not just Jonny's individual case and if it is in a deficit then they borrow funds off the RBA to balance out the EAS thus driving the cash rate up or down depending on the surplus or shortage of borrowable funds, if the borrowable funds are in deficit this will drive drive the cash rate up resulting in interest rate rises and downturn in economic activity as the price of money is dearer and it will cost more to individuals/firms to borrow e.g. on mortgages and new buyers entering the market
this should all be in your textbook or atleast on the RBA site under ''monetary policy'' as monetary policy implements the cash rate
There are two types of cash rate, official and unofficial, official being between authorised dealers and unofficial being those not authorised to deal with the RBA - correct me if I'm wrong. Anyway the commercial banks hold Exchange Settlement Accounts with the Reserve Bank and at the end of the day, exchanges of funds are either in a surplus or deficit because one individual say Jonny wants to cash a Westpac cheque at Commonwealth bank , Westpac will be in a deficit OR surplus at the end of the day as a result of millions of transfers not just Jonny's individual case and if it is in a deficit then they borrow funds off the RBA to balance out the EAS thus driving the cash rate up or down depending on the surplus or shortage of borrowable funds, if the borrowable funds are in deficit this will drive drive the cash rate up resulting in interest rate rises and downturn in economic activity as the price of money is dearer and it will cost more to individuals/firms to borrow e.g. on mortgages and new buyers entering the market
this should all be in your textbook or atleast on the RBA site under ''monetary policy'' as monetary policy implements the cash rate