Summary: Cash rate expectations path steeper through 2022, first half of 2023; cash rate now expected to average 1.61% in February 2023; week’s data generally positive, dominated by employment report; no changes to ADI cash rates in survey.
Expectations moved to reflect a steeper 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 slowly from the current rate of 0.050% to 0.135% by May and then increase to 0.615% by August. November contracts implied a 1.225% rate while February 2023 contracts implied 1.61%. A week ago, the February 2023 contract’s price implied an average rate of 1.53%.
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.
Economic data or events of the week which had the potential to affect domestic interest rate expectations were dominated by the latest employment report.
The minutes of the RBA’s March board meeting were released on Tuesday. They did not contain anything particularly new although economists noted mentions of risks “to the upside” with regards to wages and that businesses were “increasingly prepared to pass higher costs” to consumers.
Westpac and the Melbourne Institute released the February reading of their leading index a day later. The annualised growth rate remained in negative territory after January’s reading was revised down. However, as one economist noted, the latest reading implies GDP growth at only slightly below trend.
On Thursday, February’s Labour Force report again exceeded expectations in terms of additional jobs. The jobless rate hit 4% while the participation rate hit an all-time high.
3 month BBSW is a useful benchmark for cash rates and it finished the week 2bps higher at 0.17%. Currently, the RBA’s target for the overnight lending rate between banks is 0.10% but actual overnight interbank loans are still being negotiated at 0.05%, 5bps above the RBA’s exchange settlement account (ESA) rate for ADI deposits with it.
There were no changes made by deposit-taking institutions in our survey of cash account interest rates this week.
CASH ACCOUNTS
| 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 | 0.20% | 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 | 0.35% | 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 |