- Official Cash Rate
The Official Cash Rate (OCR) is the
interest ratepaid by banks in the overnight money marketin Australiaand New Zealand. Through the regulated use of Exchange Settlement Accounts, a central bankis able to adjust the interest rates of a nation's economy. The OCR cannot be changed by transactions between financial institutions as this does not change the supply of money, only its location. Only transfers between the central bankand an institution can affect the cash rate.
As banks are made to settle all inter-bank transfers overnight, the central bank can regulate the rate paid for cash by the sale or buy back of bonds and other government issued securities. As the sale or purchase of bonds affects the supply of money, then the interest rate will change to reflect its availability. This system indirectly influences the term structure of interest rates in the whole economy. Changes to the official cash rate generally affect the rates on housing and other loans within a matter of days or weeks. Under the Australian system the
Reserve Bank of Australiaissues its dealing intentions at the start of each day, and banks and other financial institutions will act prior to the actual rate being achieved.
* [http://www.rbnz.govt.nz/monpol/about/0072140.html What is the Official Cash Rate from Reserve Bank of New Zealand]
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