The pass-through effect of the Reserve Bank of Australia's cash rate on deposit and lending rates

• We analyze RBA cash rate pass-through effects on lending and deposit rates. • Symmetric lending rate pass-through occurs below a 4.75 % cash rate. • Lending rates increase more than they decrease within specific cash rate ranges. • Deposit rates show no asymmetry in response to cash rate changes. • Regulatory bodies urged to monitor lending rates at specific thresholds. Using a multiple-threshold regression model and monthly data (April 1982−July 2024), we analyze the Reserve Bank of Australia's cash rate pass-through effects on lending and deposit rates. For lending rates, pass-through is symmetric when the cash rate is below 4.75 %. However, at certain cash rate levels, mortgage and small business rates shoot up like rockets but fall like feathers. No asymmetry was detected in deposit rates, suggesting a symmetric response to changes in the cash rate. These findings have important implications for regulatory bodies, highlighting specific cash rate levels and corresponding lending or deposit rates that may require closer scrutiny.