Official cash rate
The official cash rate (OCR) is interest rate paid by banks in the overnight money market in Australia and New Zealand. Through the regulated use of exchange settlement accounts, a central bank is 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 bank and 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 (these are known as domestic market operations). 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 Australia issues its dealing intentions at the start of each day, and banks and other financial institutions will act prior to the actual rate being achieved.
In New Zealand
The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank to meet the inflation target specified in the Policy Targets Agreement. The current PTA, signed in December 2008, defines price stability as annual increases in the Consumers Price Index (CPI) of between 1 and 3 per cent on average over the medium term.
The OCR was introduced in March 1999 and is reviewed eight times a year by the Bank. Monetary Policy Statements are issued with the OCR on four of those occasions. Unscheduled adjustments to the OCR may occur at other times in response to unexpected or sudden developments, but to date this has occurred only once, following the 11 September 2001 attacks on the World Trade Centre in New York.
What the OCR does The OCR influences the price of borrowing money in New Zealand and provides the Reserve Bank with a means of influencing the level of economic activity and inflation. An OCR is a fairly conventional tool by international standards. In the past, the Reserve Bank used a variety of tools to influence inflation, including influencing the supply of money and signalling desired monetary conditions to the financial markets. Such mechanisms were more indirect, more difficult to understand, and less conventional.
How the OCR works Most registered banks hold settlement accounts at the Reserve Bank, which are used to settle obligations with each other at the end of the day. For example, if you write out a cheque or make an EFT-POS payment, the money is paid by your bank to the bank of the recipient. Many hundreds of thousands of such transactions are made every day. The Bank pays interest on settlement account balances, and charges interest on overnight borrowing, at rates related to the OCR. These rates are reviewed from time to time, as is the OCR. The most crucial part of the system is the fact that the Reserve Bank sets no limit on the amount of cash it will borrow or lend at rates related to the OCR.
As a result, market interest rates are generally held around the Reserve Bank’s OCR level. The practical result, over time, is that when market interest rates increase, people are inclined to spend less on goods and services. This is because their savings get a higher rate of interest and there is an incentive to save; and conversely, people with mortgages and other loans may experience higher interest payments.
When people save more or spend less, there is less pressure on prices to rise, and therefore inflation pressures tend to reduce. Although the OCR influences New Zealand’s market interest rates, it is not the only factor doing so. Market interest rates – particularly for longer terms – are also affected by the interest rates prevailing offshore since New Zealand financial institutions are net borrowers in overseas financial markets. Movements in overseas rates can lead to changes in interest rates even if the OCR has not changed.
- Central Bank Watch
- Australia: Reserve Bank of Australia cash rate target
- Europe: Key European Central Bank interest rates
- New Zealand: Reserve Bank of New Zealand official cash rate decisions and current rate
- United Kingdom: Bank of England Monetary Policy Committee bank rate history
- United States: Federal Reserve intended federal funds rate
Economy of New Zealand Economic history Currency Government IndustryAustralian and New Zealand Standard Industrial Classification • Beer in New Zealand • Campaign Against Foreign Control of Aotearoa • International rankings of New Zealand • Kauri gum • KiwiSaver • Leaky homes crisis • Licensing Trust • Median household income in Australia and New Zealand • Mortgagee auction • New Zealand Business Roundtable • The New Zealand Institute • Social class in New Zealand • Tourism in New Zealand • Woodchipping Agreements Australian economy History Currency State economies Industries Taxation Banking and Finance Regulatory agencies Energy Economic conditionsHome ownership · Property bubble · National debt Unions Trade agreementsAustralia – United States FTA · Australia–Chile FTA · Australia-New Zealand FTA Category:Economy of Australia
Wikimedia Foundation. 2010.
Look at other dictionaries:
Official Cash Rate — The Official Cash Rate (OCR) is the interest rate paid by banks in the overnight money market in Australia and New Zealand. Through the regulated use of Exchange Settlement Accounts, a central bank is able to adjust the interest rates of a nation … Wikipedia
official cash rate — Fin the current interest rate as set by a central bank. Abbr. OCR … The ultimate business dictionary
Cash for Honours — (also Cash for Peerages, Loans for Honours or Loans for Peerages) is the name given by some in the media to a political scandal in the United Kingdom in 2006 and 2007 concerning the connection between political donations and the award of life… … Wikipedia
rate — The cost of debt service paid by a borrower or issuer to a lender or investor. The rate is expressed as an annual percentage of the amount borrowed. For some notes and bonds that pay interest semiannually, the semiannual interest due to the… … Financial and business terms
discount rate — The interest rate charged on loans by the Federal Reserve Bank. Chicago Board of Trade glossary The interest rate charged by the Federal Reserve to its member banks (banks which belong to the Federal Reserve System) for funds they borrow. This… … Financial and business terms
Johnny Cash — For the country song, see Johnny Cash (song). Johnny Cash Background information Birth name John R. Cash Born … Wikipedia
Discount rate — For the interest rate charged to banks for borrowing short term funds directly from the Federal Reserve, see discount window. For the fees charged to merchants for accepting credit cards, see Discount Rate under Merchant Account. For discount… … Wikipedia
Euro Interbank Offered Rate — The Euro Interbank Offered Rate (or Euribor) is a daily reference rate based on the averaged interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market). copeEuribor rates… … Wikipedia
Reserve Bank of New Zealand — Infobox Central bank bank name in local = image 1 = Reserve Bank of New Zealand logo.svg image title 1 = Reserve Bank of New Zealand logo image 2 = Reserve Bank of New Zealand.jpg image title 2 = RBNZ headquarters in Wellington headquarters =… … Wikipedia
Nonfarm Payrolls — (Количество новых рабочих мест вне сельского хозяйства) Nonfarm Payrolls это макроэкономический показатель занятости населения США вне сферы сельского хозяйства Макроэкономический показатель занятости Nonfarm Payrolls, количество рабочих мест вне … Энциклопедия инвестора