Expert Judgement used to Determine Cash Rate

The cash rate is the interest rate on unsecured overnight loans between banks. When there are sufficient transactions, the Reserve Bank calculates the cash rate using data on cash market transactions. When there are insufficient transactions to calculate the cash rate in this way, however, the Reserve Bank uses expert judgement to determine the cash rate. The use of expert judgement is closely guided by the published fall back procedures contained within the Cash Rate Procedures Manual. There are three ways in which the Reserve Bank may use expert judgement:

1. the Reserve Bank may determine the cash rate to be the last cash rate published; or
2. the cash rate target, should a new target be announced by the Reserve Bank Board; or
3. a rate that reflects the interest rate relevant to unsecured overnight funds for cash market participants, based on expert judgement and market conditions.

In all cases, the use of expert judgement will be flagged by the inclusion of the text ‘Cash Rate determined by reference to fall back procedures – Insufficient Data (or) Technical Problem’ on the Reserve Bank's Reuters and Bloomberg cash rate announcement pages. The use of expert judgement, including the type of expert judgement used – that is, fall back options A, B or C above – will be recorded in the Notes to Statistical Table F1.