RBA Rates

If the banks are only passing part of the cut, and don't have to follow the RBAs benchmark, then why not go further and not cut at all? I mean, can't there be a scenario where the bank CEOs just agree (whether they had a meeting or not) not to cut since cutting affects their bottom line?

Or why not go even further and raise interest rates if the cost of the wholesale market (Australian Interbank Rate etc) is increasing? If its going to cost more to service the loan, then the rates should go up to reflect the profits banks need to sustain themselves.

I mean, its like the PM market, you have spot price and you have the market price. You could quote spot all day long, but if spot price is too low, then either no one will sell or someone will sell with a large premium.

Once again, if the banks don't have to comply with the RBA benchmark, why comply at all?
 
A cartel is a group of apparently independent businesses whose goal is to increase their collective profits by means of price fixing, limiting supply, or other restrictive practices.
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fishduck said:
If the banks are only passing part of the cut, and don't have to follow the RBAs benchmark, then why not go further and not cut at all? I mean, can't there be a scenario where the bank CEOs just agree (whether they had a meeting or not) not to cut since cutting affects their bottom line?

Or why not go even further and raise interest rates if the cost of the wholesale market (Australian Interbank Rate etc) is increasing? If its going to cost more to service the loan, then the rates should go up to reflect the profits banks need to sustain themselves.

I mean, its like the PM market, you have spot price and you have the market price. You could quote spot all day long, but if spot price is too low, then either no one will sell or someone will sell with a large premium.

Once again, if the banks don't have to comply with the RBA benchmark, why comply at all?
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I made the point a number of times over the years on these pages that RBA’s big lever on the economy gets very much diminished below a cash rate of 2%. With big chunks of Aus banks retail funding being sourced off shore, rates that low don’t mean much. If you’re paying say 1.5% to Goldman Sachs for a huge tranche of your mortgages, how low can you cut your loan rates? The RBA essentially became irrelevant today. They’ll cut again next quarter and the banks will cut even less than they did this time. If at all.
 
Lovey80 said:
They’ll cut again next quarter and the banks will cut even less than they did this time. If at all.
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Of course, a few politicians will do the obligatory "I'm angry banks didn't pass on the full rate cut" speech.
 
Economists warn Reserve Bank could be forced to print money if rate cuts fail to deliver

Goldman Sachs believes RBA could resort to $200bn bond-buying scheme if rate cuts don’t lift inflation

The Reserve Bank of Australia could be forced into unconventional policy measures such as money printing to save the economy from stagnation if its latest round of interest rates cuts fail to stimulate growth, economists have warned.

After cutting the cash rate for the third time this year on Tuesday to a fresh record low of 0.75%, the central bank warned that there could be more cuts to come as it pursues its twin targets of reducing unemployment and keeping inflation between 2% and 3%.

But it has failed to meet the inflation aim for 20 successive quarters, leading to increasing speculation that it will be forced to use less conventional methods such as buying up billions of dollars of government bonds to flood the financial system with money.

...
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https://www.theguardian.com/austral...d-to-print-money-if-rate-cuts-fail-to-deliver
 
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