From 2014: PBOC Reasons for Cutting Interest Rates Versus Reality of Deflation
In De-mystifying RBA Setting of Interest Rates, Steve Keen showed how the RBA followed the market's adjustment of interest rates.
The graph shows an almost 100% correlation between the cash rate and the 90-day bank bill rates. However the data also shows that in almost every instance the RBA cash rate FOLLOWS the 90-day bank bill rate, rather than leads it. The data also shows that the RBA will generally increase rates once the 90-day bank bill rate gets 50 basis points or more above the RBA cash rate. The actions on the downside are not as tight, with decreases in cash rates occurring when the bank bill rate is anywhere from 0 to 100 basis points below the 90-day bank bill rate. However as a rule of thumb the RBA tends to decrease the cash rate when the 90-day bank bill rate is 50+ basis points lower than the cash rate.The graph is currently down at the site. Here's EWI showing a similar pattern at the Federal Reserve: Here's How to Know When the Fed Might Raise Interest Rates. Here is an article from the Federal Reserve San Francisco Branch: Given the relatively small size of the federal funds market, why are all short-term rates tied to the federal funds rate? The article doesn't make the argument that central banks chase rates, but the chart on the page does:
Notice the Fed is following the market at turning points.
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