Answer to Question #18425 in Macroeconomics for Saud

Question

The reserve bank of Australia has just raised interest rates. Why did the bank do this? What is their overriding objective?

Answer 1

Banks usually raise interest rate in order to attract money. It means that they have not enough liquidity and they need to attract cash from society. Objectives could be for example, necessity to pay some debts in currency, and bank could not afford it. Other objective could be when the sum of money is too high in& economy and banks try to take cash from market in order to stop inflation process.