ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Reserve Bank of Australia raised the cash rate by another 0.25% on Tuesday, 7 March. From May 2022 to March 2023, the cash rate has increased by 3.50%, from 0.10% to 3.60%. This will have a knock-on effect on variable home loan interest rates, which look set to continue rising.

Detailed explanation-2: -How does the cash rate affect my savings account? Savings accounts also move in line with the cash rate, meaning that if the cash rate goes up, you can expect much more attractive returns on your savings. The hope is to keep inflation from getting out of hand by encouraging people to save more and spend less.

Detailed explanation-3: -At its March meeting, the RBA decided to further lift the cash rate by 25 basis points to 3.6%. Rate increases are a reflection of economic conditions. Central banks raise and lower interest rates to stimulate economic growth and manage inflation. If inflation is high, they might raise rates to try to control it.

Detailed explanation-4: -Put simply, by raising interest rates on credit products, consumers and businesses are less likely to borrow funds and therefore spending decreases. And when spending decreases, the theory is that this can slow down economic growth and inflation.