Summary: Cash rate expectations path steeper through remainder of 2022, first quarter of 2023; cash rate now expected to average 3.53% in May 2023; 3-month BBSW up 19bps; nine increases to surveyed ADI cash rates.
Expectations moved to reflect a steeper path for the actual cash rate through the remainder of 2022 and the first quarter of 2023 but a slightly lower path through the second half of 2023 in comparison to its path at the end of the previous week. At the end of the week, contracts implied the cash rate would rise from the current rate of 1.31% to 1.835% in August and then increase to 2.25% by September. November contracts implied a 3.07% cash rate while May 2023 contracts implied 3.53%. A week ago, the May 2023 contract’s price implied an average rate of 3.525%.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system. As a result, the actual cash rate has been noticeably below the target rate. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not the implied likelihood of the RBA changing its target.
Notable economic data or events which have the potential to affect domestic interest rate expectations produced a mix of reports which were either extremely positive, extremely negative or somewhere between the two.
NAB’s June business report was released on Tuesday. Readings of its conditions index and its confidence index both decreased.
The Westpac-Melbourne Institute’s July reading of their consumer sentiment index was also released. The latest reading of the index fell again, with Westpac’s Chief Economist saying anxiety around rising interest rates is increasing.
On Thursday, June’s Labour Force report again exceeded expectations in terms of additional jobs. The jobless rate dropped from 3.9% to 3.6% even as the participation rate moved to a new all-time high.
The Melbourne Institute’s July reading of inflation expectations was also released. Inflation expectations over the coming 12 months came in at 6.3%, down from 6.7% in June but significantly higher than the 3.7% recorded in July 2021.
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3-month BBSW is a useful benchmark for cash rates and it finished the week 19bps higher at 2.15%. The RBA’s target for the overnight lending rate between banks is 1.35% but actual overnight interbank loans are still being negotiated at 1.31%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were nine increases made by deposit-taking institutions in our survey of cash account interest rates this week. The increases ranged from as little as 5bps to as much as 70bps.
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.10% | |
| AMP Notice Account | 0.10% | |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 1.15% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 1.00% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.70% | On balances up to $500,000.99. No withdrawals per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. |
| BoQ Bonus Interest Savings | 0.60% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.35% | |
| CBA Goal Saver Account | 1.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 1.20% | No maximum balance |
| Heritage Online Saver | 0.60% | Minimum balance $250,000 |
| ING Savings Accelerator | 1.70% | Minimum balance $150,000 |
| Macquarie CMA | 0.50% | Minimum balance $5000 |
| ME Online Savings | 1.60% | On balances up to$250,000. Make at least four tap & go purchases per month |
| NAB iSaver | 0.30% | |
| NAB Reward Saver | 1.00% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.40% | On balances $0 - $500,000. Minimum $200 deposit each month and no withdrawals |
| Suncorp Growth Saver | 2.00% | Minimum $200 deposit each month and no more than 1 withdrawal |
| UBank Save Account | 1.10% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Up Saver Account | 1.85% | On a combined balance of upto $250,000. Minimum $200 deposit each month into Spend or Save accounts. |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.85% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. |