This paper looks into the Reserve Bank of Australia in terms of the bank setting the cash rates with accordance to several factors with regards to the decision made by the RBA in April 2012. In the case where the RBA lowered the interest rates by 25 basis points, Australian banks are expected to reduce their interest rates by a similar margin. This paper investigates and explains the reasons as to why the commercial banks did not match their interest rates with accordance to the cash rate set by the RBA. On the other hand the reason as top why the treasurer believes that the banks ought to pass rate cuts on to the public is broadly discussed. When studying the Australian RBA in terms of it determining cash rates, it is vital to also look into other regions and determine their cash rates. This paper has thoroughly looked into the economic markets as well as interest rates of banks in Europe, India as well as China. The Reserve Bank of Australia (RBA) which is Australia’s central bank, has the role of formulation and implementation of the monetary policy as well as carrying out its operations with the aim of maintaining a sturdy fiscal system and it also carries out the duty of issuing the country’s currency. Not only is the Reserve bank of Australia the sole issuer of the country’s banknotes, it is also in charge of managing the country’s foreign and gold reserves as well as acting as a banker to the Australian government. The RBA has the duty of setting the target cash rate. The official cash rate is the interest rate that is normally paid by banks in Australia in an all night money market. The cash rate can only be affected by transfers that may have occurred between the Reserve Bank of Australia and the other banks. By raising and lowering the cash rate, the RBA has tried to influence the Australia economy with the intention of keeping some economic parameters in a constricted range. In November 2011, the RBA undertook the action of cutting official interest rates by 25 basis points. The Reserve Bank of Australia takes into consideration a variety of factors before it raises or lowers the cash rate this is vital since any change in the cash rate impacts several aspects in the Australian economy. In April 2012, the RBA board opted not to change the cash rate and hence left it at 4.25 per cent (Reserve Bank of Australia, 2011). The RBA takes into account the monetary policy since it has a major influence on the housing market. In the housing market sector, the house prices are first looked into so as to determine whether the cash rate should be adjusted because the house prices have a probable impact on future inflation. The house market plays a significant role in the economic growth of the country as well as in the general welfare of its citizens. It is therefore necessary for the RBA to consider house marketing as a determinant in determining the cash rates since any change/surge in the house prices, a ripple effect occurs through an increase or decrease in the rate of inflation. Since the housing prices in Australia gave away some indications of gaining stability and the housing market remaining soft, the RBA decided to leave the cash rate as it previously was. The rate of inflation in Australia is a key determinant in cash rate determination by the RBA. This is evident since a negative change in the inflation rat