What is the official cash rate?

All loans, credit card and deposit interest rates are set after banks and other institutions price in the Reserve Bank’s official cash interest rate.

The Reserve Bank of Australia governor Glenn Stevens is often in the news but many people don’t understand what he does. Every month, the RBA governor and the RBA board meet to set the official cash rate. This is the rate the RBA pays charges the banks to hold or lend them money overnight while they settle their loans and deposit liabilities.

When the RBA changes the cash rate, retail interest rates are also likely to change.

Source: Bankheadlines.com.au

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