What is the RBA Rate Statement?
The RBA Rate Statement is the Board decision-day release, titled Statement by the Monetary Policy Board: Monetary Policy Decision. It announces the cash rate target for overnight loans between banks in Australian dollars. The actual rate is a census of qualifying RITS loans between settlement account banks, tagged IBOC1 and IBOC2, with no seasonal adjustment since May 2016.
Policy aims to keep inflation at 2-3% on average over time, and the decisions archive reaches back to 1990. It does not set retail loan or deposit rates, nor the quarterly forecast report or minutes published two weeks later.
When is it released and what happens each release?
The Board meets 8 times a year since February 2024 after 11 meetings a year, and dates are published in advance. The outcome appears at 2:30 pm Sydney time on day two, and any target change takes effect the next day. Before December 2007 releases appeared only when the target changed.
The Governor holds a 3:30 pm press conference on decision day, and minutes follow two weeks later. The quarterly forecast report accompanies the February, May, August and November outcomes, and decisions are final and never revised. The measured rate may be republished only until 4:00 pm on publication day, never after, even if an error is found.
What moves the RBA Rate Statement?
The Board weighs inflation, jobs, spending, global risks and markets before setting the target.
- Cash rate target and ES rate: headline target plus settlement rate set 10 basis points (0.10) below target as floor since November 2020.
- Inflation assessment: CPI inflation with goods versus services, cost pressures, expectations and the path to 2-3%.
- Labour market and wages: employment growth, unemployment and underuse, and pay growth read against productivity and full employment.
- Demand and financial conditions: household spending and real incomes, housing investment and prices, savings, the exchange rate and asset prices.
- Global backdrop: foreign services inflation, the China outlook, conflicts and the repair of supply chains.
- Forward guidance: short sentences state what would trigger future moves, read as 25 basis points normally and 50 in 2022.
On 7 November 2023 the Board raised the target 25 basis points to 4.35% and the ES rate to 4.25%. The move followed a hold since June 2023 after rises of 4.00 points since May 2022. Goods inflation had eased, but services prices rose briskly and beat forecasts as jobs stayed tight and housing rose.
The forecast saw inflation near 3.5% by end 2024 and jobless near 4.25%. It added that further moves depend on data and risks, and the 6 February 2024 release held rates with December quarter CPI at 4.1%.
How is the RBA Rate Statement calculated?
- Decision rule: the Board sets the target so forecast inflation returns to 2-3% on average over time, allowing for lags.
- Implementation corridor: surplus balances earn target minus 0.10 as floor since November 2020. Shortfalls pay target plus 0.25 as ceiling, with weekly operations managing supply. For illustration, a rise from 4.10% to 4.35% sets the floor at 4.25% and the ceiling at 4.60%.
- Measurement of actual rate: the actual rate is a volume-weighted average of qualifying overnight loans, rounded to two decimals. Scope covers same-day IBOC1 legs unwound as IBOC2 between settlement banks under the May 2016 method. Off-system deals, non-banks, intragroup trades and pre-committed deals are excluded. For illustration, 100m at 4.33%, 200m at 4.34% and 150m at 4.35% give 4.34%.
- Publication and fallback: published via Reuters RBA30 and Bloomberg RBAO7 before 9:20 am for the prior business day. If data fail, the fallback is the last rate, the new target or expert judgement flagged as fallback procedures.
- Total Return Index: a benchmark that reinvests the cash rate, with base 100 on 4 January 2011. It is TRI_t = TRI_{t-d} times (1 plus CashRate_{t-d} times d over 365 over 100) where d counts days since the prior day.
Key point: The statement sets only the overnight cash target, not retail loan or deposit rates, which adjust indirectly. It is not the quarterly forecast report or the minutes published two weeks later.
