RBA interest rates: What they are and why they matter

The Reserve Bank of Australia (RBA) is Australia's central bank, and it sets the official interest rate, known as the cash rate. The cash rate is the interest rate that banks charge each other to borrow money overnight. It's a key tool that the RBA uses to manage inflation and economic growth.
When the RBA raises the cash rate, it becomes more expensive for banks to borrow money, which in turn makes it more expensive for businesses and consumers to borrow money. This can slow down economic growth by discouraging people from spending and investing.
Conversely, when the RBA lowers the cash rate, it becomes cheaper for banks to borrow money, which in turn makes it cheaper for businesses and consumers to borrow money. This can stimulate economic growth by encouraging people to spend and invest.
The RBA's decision to raise or lower the cash rate is based on a number of economic factors, including inflation, economic growth, and unemployment. The RBA's goal is to keep inflation within a target range of 2-3%, and to maintain economic growth and low unemployment.
The RBA's interest rate decisions can have a significant impact on the Australian economy. For example, raising the cash rate can help to cool down an overheating economy by slowing down economic growth. Conversely, lowering the cash rate can help to stimulate a sluggish economy by encouraging people to spend and invest.
The RBA's interest rate decisions are closely watched by businesses, consumers, and investors. They can have a direct impact on borrowing costs, investment decisions, and economic growth.