Snapshot of central bank policy interest rates
Central banks are moving in markedly different directions. Australia has raised its policy rate by 0.75 percentage points over the past year, while the US has cut by the same amount.
Central banks have one particularly powerful lever for influencing their economies: the policy interest rate.
In Australia, this is the RBA's cash rate target — the target interest rate for unsecured overnight lending between banks. Other central banks use somewhat different arrangements, so the Bank of International Settlements (BIS) identifies a comparable official policy rate for each country.
Changing this rate flows through financial markets to mortgage rates, business borrowing costs, deposit rates, asset prices and exchange rates. Higher rates generally restrain spending and inflation; lower rates stimulate economic activity.
The international picture is currently strikingly mixed.
Australia's policy rate stands at 4.35%, up from 3.60% a year earlier — the largest increase among the 11 economies shown below. Japan has also tightened, from 0.50% to 1.00%, while Korea and the euro area have increased rates by 0.25 percentage points.
The direction has been very different elsewhere. The US has cut by 0.75 percentage points, while Canada and New Zealand have cut by 0.50 points. Britain and Sweden have also eased.
Norway has the highest nominal policy rate in the group at 4.25%, just below Australia's 4.35%.
But nominal rates tell only part of the story. Subtracting current inflation produces a simple real policy rate. On this measure, Australia's rate is only around 0.4% above inflation, compared with roughly 1.3% in Canada and Norway.
The comparison illustrates why the same nominal interest rate can represent quite different monetary settings across economies.