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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:
This article was written by Eamonn Sheridan at www.forexlive.com.
