Reserve Bank of Australia Assistant Governor Christopher Kent
Headlines via Reuters:
- RBA to adopt an ample reserves system for monetary policy
- To use open market repo operations at a price near the cash rate target
- To offer repos in full allotment auctions
- Supply of reserves can rise and fall in line with changes in demand
- RBA could also supply reserves via purchases of short-dated government bonds and/or fx swaps
- Can respond to market stresses if needed, including by conducting OMO more frequently than once a week
- Will end the current ‘floor’ system with an excess of reserves
- RBA’s balance sheet will be no larger than needs to be in order to implement monetary policy
- No change to current rundown of balance sheet by holding bonds to maturity
- Public consultation and liaison with market participants will commence shortly
The brief explanations (via Reuters):
- The RBA intends to change the way it provides liquidity to the banking system, moving to one that provides ample liquidity through regular money market operations.
- Kent said the Bank would end its current system of setting a floor for rates with excess reserves and an exchange settlement (ES) rate. Instead, it will shift over time to a system of ample reserves in which banks' demands for reserves are satisfied via open market repo operations at a price near the cash rate target, in what are known as full allotment auctions.
AUD barely noticed:
