How does the RBA meeting statement affect traders?
The RBA meeting statement affects traders because it sets the official interest rate in Australia – the cash rate. In turn, the cash rate affects the overall stability of the financial system, including borrowing costs, rates of return and currency values. That is why, when an RBA meeting takes place, the market can become slightly more volatile for a short period.
The cash rate is defined as the official interest rate at which banks borrow money from other banks on an overnight basis. However, it also influences rates set by commercial banks and other lenders, which affects spending and borrowing, and – eventually – inflation. This causes a ripple effect across the Australian economy, including the demand for bonds, stocks, currency and other securities. The meeting statement is important to traders because they can come up with their trading strategy and make decisions based on the most recent rate changes. Many traders keep informed about RBA meeting dates and statement releases to identify opportunities and minimise their trading risk.