Answer to Question #89410 in Macroeconomics for anderson houla

Question

Explain how the change you advocate would affect the cash rate

Answer 1

The cash rate is the market interest rate for overnight loans between financial institutions.

The cash rate is a tool by which the central bank influences the economy. Cash rate determined by the Central Bank, usually on a monthly basis. high interest rates reduce consumer credit growth rates and stimulate savings growth, which leads to a slowdown in economic growth. Rising rates usually lead to increased capital inflows into the country and national currency growth in the medium term, however, if the growth rates are not based on high rates of economic growth, this can lead to stagnation of the economy and negative impact on foreign exchange markets in the long term.

https://www.rba.gov.au/publications/bulletin/2017/sep/1.html