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Reserve Bank pumps $2billion into economy??

Discussion in 'General Investing Discussion' started by Jenny, 10th Aug, 2007.

  1. Jenny

    Jenny Well-Known Member

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    Just watching abc news. Apparently the RB has pumped $2billion into the economy to prop it up, because of the large share market drop today.

    Where exactly do they pump it????

    I've no idea at all what this means.

    A plain english answer would be appreciated.

    Cheers
    Jenny
     
  2. Tim

    Tim Well-Known Member

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  3. jscott

    jscott Well-Known Member

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    The short-term money market is essentially the market that the banks, large financial institutions and the reserve bank lend and borrow (exchange) funds. If it wasn't for the reserve bank the cash interest rate would be floating based on supply and demand, however, the reserve bank intervenes on a daily basis, suypplying more cash and taking cash out, in a balancing act to keep the cash rate fixed. This is the rate you hear them talking about on the news when rates go up, etc.

    The funds used traditionally are not actual cash but tresaury securities as Tim has mentioned.
     
  4. jscott

    jscott Well-Known Member

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    to add to my previous post... I wouldn't be concerned about the $2bn - thats nothing - the RBA has used much much much more than that in its endeavours in the past.
     
  5. Jenny

    Jenny Well-Known Member

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    Thanks for the replies, am trying to get my head around it all.
     
  6. Smartypants

    Smartypants Well-Known Member

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    I think they were going to put it all in the Navra fund ;)