When the RBA wants to signal the public about the direction of monetary policy, it will likely use:
A) the overnight cash rate.
B) the T- bill rates.
C) the discount rate.
D) the federal funds rate.
E) the commercial paper rates.

Question

Quizplus · Accepted Answer

The overnight cash rate is the main tool used by the Reserve Bank of Australia (RBA) to signal the public about the direction of monetary policy. It is the interest rate at which banks lend or borrow funds from the RBA overnight. When the RBA wants to stimulate the economy, it can lower the cash rate, which in turn lowers the interest rates on loans and mortgages. When it wants to slow down the economy, it can raise the cash rate, which makes borrowing more expensive and slows down spending.

When the RBA Wants to Signal the Public About the Direction