Summary: Cash rate expectations path flatter; cash rate now expected to average 3.225% in May 2023; several changes to surveyed ADI cash rates.
Expectations moved to reflect a flatter path for the actual cash rate through 2022 and the first 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 0.31% to 0.565% in June and then increase to 1.315% by August. November contracts implied a 2.44% cash rate while May 2023 contracts implied 3.225%. A week ago, the May 2023 contract’s price implied an average rate of 3.575%.
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, even after the RBA increased this target to 0.35%. As such, contract prices only reflect expectations of the average actual cash rate in a given month and not some estimate of the likelihood of the RBA changing its target.
Notable economic data or events which had the potential to affect domestic interest rate expectations were a mix of good and the not-so-good.
NAB’s April business report was released on Tuesday and while its conditions index increased, its confidence index declined. However, both indices remained at above-average levels.
Midweek, the Westpac-Melbourne Institute’s May reading of their consumer sentiment index fell again. Higher Inflation rates and the prospect of rising interest rates appear to be the main factors behind the result.
The Melbourne Institute’s May reading of inflation expectations was released on Thursday. Inflation expectations over the coming 12 months came in at 5.0%, down from 5.2% in April.
3 month BBSW is a useful benchmark for cash rates and it finished the week 5bps higher at 0.97%. The RBA’s target for the overnight lending rate between banks is 0.35% but actual overnight interbank loans are still being negotiated at 0.31%, 4bps below the target but 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were several changes made by deposit-taking institutions in our survey of cash account interest rates this week. The rate of Westpac’s Life account was raised by 10bps while rates on ANZ’s Progress Saver Account, NAB’s Reward Saver Account and Volt’s Savings account were each increased by 25bps. Suncorp’s Growth Saver Account’s rate was lifted by 40bps.
| Product | Interest Rate p.a. | Special Conditions |
|---|---|---|
| AMP Saver Account | 0.10% | |
| AMP Notice Account | 0.10% | Minimum 31 days notice |
| ANZ Premium | 0.15% | |
| ANZ Progress Saver | 0.40% | Minimum $10 deposit and no withdrawal per month |
| Arab Bank Online Savings | 0.50% | Minimum balance $500,000. |
| Bankwest Smart eSaver | 0.25% | On balances from $500,000 to $5,000,000. No withdrawal per month |
| BOQ Fast Track Saver | 0.05% | Minimum monthly balance of $5000. |
| BoQ Bonus Interest Savings | 0.25% | Maximum 1 withdrawal per month. |
| CBA NetBank Saver | 0.05% | |
| CBA Goal Saver Account | 0.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 0.45% | No maximum balance |
| Heritage Online Saver | 0.25% | Minimum balance $250,000 |
| ING Savings Accelerator | 0.65% | Minimum balance $150,000 |
| Macquarie CMA | 0.00% | Minimum balance $5000 |
| ME Online Savings | 0.05% | |
| NAB iSaver | 0.05% | |
| NAB Reward Saver | 0.50% | 1 deposit and no withdrawal per month |
| RAMS Saver Account | 0.15% | On balances from $200 - $500,000. Minimum $200 deposit and no withdrawal per month |
| Suncorp Growth Saver | 0.45% | |
| UBank USaver | 0.50% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.05% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.05% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 1.15% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.25% | Minimum $50 deposit and no withdrawal per month |
| 86400 Save account | 1.20% | On balances upto $50,000 |