The practical result, over time, is that when market interest rates increase, people are inclined to spend less on goods and services. 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 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). Monetary policy decisions involve setting a target for the cash rate.

Monetary policy decisions involve setting a target for the cash rate.

A media release is issued at 2.30 pm after each Reserve Bank Board meeting, with any change in the cash rate target taking effect the following day.

Many hundreds of thousands of such transactions are made every day.

10 rate target beside the new target for the cash rate since 6 January 2008

Interest Rates and Yields: Money Market and Australian Government Securities 1976 to 1993 – originally published in Occasional Paper No. For example, if a customer makes out a cheque or makes an EFT-POS payment, the money is paid by their bank to the recipient‘s bank. Cash Rate Target. Movements in overseas rates can lead to changes in interest rates even if the OCR has not changed. The cash rate represents the target interest rate set by the RBA for overnight loans to commercial banks. It is the (near)

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.

Under the Australian system the 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 In New Zealand, the official cash rate (OCR) is set by the The OCR was introduced in March 1999 and was reviewed eight times a year up to 2015 by the Reserve Bank of New Zealand. Commercial banks borrow and lend to each other at this rate on an ‘overnight’ basis, meaning the borrowing bank repays the loan and interest at the start of the next business day. The cash rate is the interest rate on unsecured overnight loans between banks. The bank pays interest on settlement account balances, and charges interest on overnight borrowing, at rates related to the OCR. The current Remit, signed in February 2019, requires that monetary policy contributes to public welfare by supporting maximum sustainable employment whilst maintaining price stability over the medium term.

(Prior to December 2007, media releases were issued only when the cash rate target was changed.) This system indirectly influences the term structure of interest rates in the whole economy.

The cash rate target graph and table below display The materials on this webpage are subject to copyright and their use is subject to the terms and conditions set out in the This table records the percentage change in the cash

10 Securities 1993 to 1996 – update to Occasional Paper No. risk-free benchmark rate (RFR) for the Australian dollar and is also know by the acronym AONIA (Prior to December 2007, media releases were issued only when the cash rate target was changed.) The cash rate is actually the interest rate charged on overnight loans between banks. A media release is issued at 2.30 pm after each Reserve Bank Board meeting, with any change in the cash rate target taking effect the following day. Market interest rates – particularly for longer terms – are also affected by the interest rates prevailing offshore since New Zealand financial institutions are net borrowers in overseas financial markets.

This website is best viewed with JavaScript enabled, interactive content that requires JavaScript will not be available. 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 homogeneous central bank charges on overnight loans between commercial banks. See This is because their savings get a higher rate of interest and there is an incentive to save; and conversely, people with mortgages and other loans may experience higher interest payments.

Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks.

When people save more or spend less, there is less pressure on prices to rise, and therefore inflation pressures tend to reduce.

The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank to meet the dual mandate specified in the Remit to the Monetary Policy Committee.

JavaScript is currently disabled. As the sale or purchase of bonds affects the supply of money, then the interest rate will change to reflect its availability. An OCR is a fairly conventional tool by international standards.A decreased cash rate could mean lower home loan rates for borrowers, but can also mean lower savings and term deposit rates for savers.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.

See The amount of interest a retail investor pays on a loan is equal to this rate plus a premium (which is the banks profit and typically 2.0 to 2.5%).

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