cash rates and RBA

Question 1

what is the rba

Answer 1

the reserve bank of Australia, is the bank that sets the cash rates and the banks borrow money from here

Question 2

cash rates

Answer 2

refers to the rate the banks need to pay to borrow funds from the overnight market

Question 3

interest rates

Answer 3

the amount the lender charges over time on the principal amount

Question 4

purpose of cash rates

Answer 4

cash rates are responsible for when banks want to borrow funds from other banks or places in overnight money market

Question 5

What does it mean when the RBA increases the cash rate? What is it trying to achieve? How does it impact C + I

Answer 5

If the RBA increases the cash rate, this means they are trying to slow down spending so they can control the inflation rate. By increasing the cash rate, banks will then increase the interest rate, which will influence people and businesses to spend less and invest less.