Contractionary is monetary policy
Contractionary is monetary policy that was passed in May 2022. The fact that the cash rate has been increased shows that there will be a shift towards tighter monetary policy stance.
ii. There may be varied factors that informed the official cash rate (OCR) of the RBA in May of 2022. Some potential reasons could include:
Inflation Concerns: The RBA might have noticed some inflationary pressure in the economy, in which case an increase in the cash rate will help suppress inflation, allowing it to remain within the desired limits.
Economic Recovery: This could be as a result of the Australian economy may have indicated a strong economic recovery from Covid-19 as a reason for this decision by the RBA.
Contractionary is monetary policy
Financial Stability: For instance, RBA might have concerns on the future of financial stability especially with regards to house pricing and seek to reduce the sharp growth seen in property charges.
iii. The economic impact of an OCR response is intended to:
Curb Inflation: As a result, the RBA increases the OCR to cut back on spending by consumers and borrowers in order to bring down the pressure of inflation for an economy that runs hot.
Influence Exchange Rates: Increased OCR entices foreign investments and thereby generates the Aussie appreciation. This has implications on trade balances in the country.
Contractionary is monetary policy
Financial Stability: This would mean that the OCR response needs to deal with concerns about the stability of the financial system and possible overspending, including in the housing market.
iv. Implications of the OCR response:
The disposable income and consumption of families with mortgage debt: Higher mortgage interest rates stem from a growing OCR which result in higher interest payments for households that borrowed to buy homes. use APA style for citations
Pensioners who rely on deposit interest income: This could cause interests in savings and term deposits also go up.
To order this assignment click here or contact info@topgradeswriting.com