Financial Regulation and Financial Institutions

001 - Foundations of Finance - S1 2020 of tion Financial Regulation and Financial Institutions Considering the inflation target of the RBA, an example of when expansionary monetary policy will be implemented, is if the inflation rate is at for two or multiple quarters. Contractionary monetary policy, on the other hand, will be implemented if the inflation rate is at for multiple quarters. The objective of expansionary monetary policy is to the overall cost of debt in the economy, while in contractionary monetary policy, the objective is to the overall cost of debt Controlling the cost of debt directly influences the level of consumption and investment hence either stimulating or dampening economic activity In the advent of COVID19, the RBA dramatically cut the making a key source of funds that provides to banks cheaper. Banks passed on this cost saving to mortgages and other bank borrowers by the interest rates on loan repayments. This places on bank profitability Next page page igation 13 14 001 - Foundations of Finance - S1 2020 of tion Financial Regulation and Financial Institutions Considering the inflation target of the RBA, an example of when expansionary monetary policy will be implemented, is if the inflation rate is at for two or multiple quarters. Contractionary monetary policy, on the other hand, will be implemented if the inflation rate is at for multiple quarters. The objective of expansionary monetary policy is to the overall cost of debt in the economy, while in contractionary monetary policy, the objective is to the overall cost of debt Controlling the cost of debt directly influences the level of consumption and investment hence either stimulating or dampening economic activity In the advent of COVID19, the RBA dramatically cut the making a key source of funds that provides to banks cheaper. Banks passed on this cost saving to mortgages and other bank borrowers by the interest rates on loan repayments. This places on bank profitability Next page page igation 13 14