Cash rate

The cash rate is the interest rate on unsecured overnight loans between banks. The Reserve Bank of Australia sets a target for it as its main monetary policy tool, and it influences the interest rates lenders charge.

An example

After a Reserve Bank board meeting, the bank announces whether the cash rate target is changing. Lenders then decide whether to change their own rates.

Why it matters

The cash rate is a reference point, not the rate a borrower pays. Private and non-bank lenders set their own pricing. Privet shows the current cash rate target, with its source, as context only.

Points to check

The cash rate influences bank funding costs, but private and non-bank lenders price loans using their own cost of funds, risk assessment and fees. A change in the cash rate may not flow through to a private loan at all, or may flow through differently. Ask any lender whether your rate is fixed or variable, what it is linked to and how changes are notified. Privet shows the current target with its Reserve Bank source and date.

Related terms

• Non-bank lender
• Private lender

Further reading: Reserve Bank of Australia