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Why does the RBA change interest rates by 0.25%?

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Why does the RBA change interest rates by 0.25%?

Hi Clearly interest rates are very topical at the moment so I hope you might be able to shed some insight on something that has me curious. With very few exceptions, changes to interest rates by the RBA and other central banks always seem to be 0.25% up or down each time. Is there a particular reason why they are always 0.25%? Wouldn't making changes of something like 0.1% each time (or multiples of it) allow the RBA etc to "fine tune" their responses to whatever economic circumstances they are dealing with at the time? Cheers

Answer

Hi Carl,

Ironically the next change by the RBA is likely to be a 0.15% hike in June taking the cash rate to 0.25%, with 2 more 0.25% hikes expected through 2022 taking the official RBA interest rate to 1.0% by Christmas – a move in June will be the 1st hike by the RBA in well over 11-years.

The reason the RBA cuts / hikes rates  is generally to stimulate, or slow down the local economy, apparently a move of less than 0.25% wouldn’t have a worthwhile impact,  hence why many economists are now considering large 0.5% hikes through 2022 / 23 in the US and potentially Australia in an effort to combat runaway inflation.

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RBA Cash Rate Monthly
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