Transmission
Money markets and expectations respond, followed by bank terms and borrowers’ decisions. Effects are delayed and uneven.
FinFly Explains / Economy
What a central bank policy rate does
Policy rates influence funding costs and, through the financial system, spending, saving and prices.
Different rates
A policy rate is not your loan rate. Check your contract rather than relying on the headline.
Reading a change
A cut from 8% to 7.5% is 0.5 percentage points, or 50 basis points. This is an illustration, not the CBA’s current rate.
Method
Primary sources
The explainer is checked against these institutional and industry sources. Links open the original material.