Policy rate in Australia

The official cash rate set by the Reserve Bank of Australia (RBA), the benchmark rate through which it conducts monetary policy. It is the reference price of money in the Australian economy.

It is not derived statistically but decided by the RBA's monetary policy board at its scheduled meetings, in line with its inflation target and the state of the economy, and quoted as a percentage.

Changes in the cash rate feed through to market rates, credit, the exchange rate and, via these, to consumption, investment and prices. A hike, or hawkish tone, tends to support the Australian dollar (AUD), while a cut weakens it.

It is a discretionary decision whose effects on the economy work with long and variable lags. The rate stays constant between meetings, and the market impact depends more on the surprise and forward guidance than on the level itself.