Summary: Cash rate expectations path steeper through 2022, first half 2023; cash rate now expected to average 3.705% in May 2023; RBA increases cash rate target by 50bps; no increases to surveyed ADI cash rates.
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 from the current rate of 0.81% to 1.17% in July and then increase to 1.655% by August. November contracts implied a 2.815% cash rate while May 2023 contracts implied 3.705%. A week ago, the May 2023 contract’s price implied an average rate of 3.535%.
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 were limited to a couple of private sector surveys. However, the RBA Board also met and provided a surprise to financial markets.
ANZ’s May Job Ads survey was released at the very start of the week. It reported a 0.4% rise, taking total advertisements close to the March 2022 cyclical peak.
The Melbourne Institute’s May reading of its Inflation Gauge was also released. The index jumped 1.1% over the month while the annual rate sped up from 3.4% to 4.8%.
The RBA Board met for its June meeting the next day. As widely expected, it increased its cash rate target and the rate paid on exchange settlement balances. However, the 50bps increase of both caught most economists and observers by surprise.
3 month BBSW is a useful benchmark for cash rates and it finished the week 27bps higher at 1.51%. The RBA’s target for the overnight lending rate between banks is now 0.85% but actual overnight interbank loans are still being negotiated at 0.81%, 4bps below the target but 6bps 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.
| 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 | 0.75% | 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 | 0.30% | |
| CBA Goal Saver Account | 0.25% | On balances of $250,000 - $999,999. Minimum $200 deposit and no withdrawal per month. |
| Great Southern Bank | 0.70% | No maximum balance |
| Heritage Online Saver | 0.40% | 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 | 0.60% | |
| UBank USaver | 0.50% | Limit $200,000. Minimum $200 deposit per month. |
| UBank USaver Ultra | 0.10% | Limit $200,000. Minimum $200 deposit per month. |
| Up Saver Account | 1.35% | Calculated daily, paid monthly once qualfied |
| Volt Bank | 1.15% | Limit $245,000 |
| Westpac eSaver | 0.05% | |
| Westpac Reward Saver | 0.50% | Minimum $50 deposit and no withdrawal per month |