Summary: Cash rate expectations path flatter; cash rate now expected to average 2.145% in February 2023; one change 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 0.060% to 0.13% by May and then increase to 0.91% by August. November contracts implied a 1.775% cash rate while February 2023 contracts implied 2.145%. A week ago, the February 2023 contract’s price implied an average rate of 2.295%.
Since March 2020, the RBA has not enforced its cash rate target by draining liquidity from the banking system via changes in the total of ESA balances. As a result, the actual cash rate has been noticeably below the target rate, even after the RBA reduced this target to 0.10%. 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 did nothing to materially disturb expectations of higher official interest rates.
NAB’s March business report was released on Tuesday and its conditions and confidence indices both increased. Cost pressures featured prominently.
Midweek, the Westpac-Melbourne Institute’s April reading of their consumer sentiment index declined again, as interest rates, inflation and weather continued to unnerve consumers
On Thursday, March’s Labour Force report undershot expectations in terms of additional jobs but the jobless rate was unchanged at 4%, while the participation rate maintained its all-time high reading.
The Melbourne Institute’s April reading of inflation expectations was also released. Inflation expectations over the coming 12 months came in at 5.2%, up from 4.9% in March.
3 month BBSW is a useful benchmark for cash rates and it finished the week 1bp higher at 0.31%. The RBA’s target for the overnight lending rate between banks is currently 0.10% but actual overnight interbank loans are still being negotiated at 0.06%, 6bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There was one change made by a deposit-taking institutions in our survey of cash account interest rates this week. Great Southern Bank raised its eSaver Flexi account rate by 10bps.
| 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 | 0.15% | 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 | 0.25% | 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 | 0.05% | |
| 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 | 0.90% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.15% | Minimum $50 deposit and no withdrawal per month |
| 86400 Save account | 1.20% | On balances upto $50,000 |