Reserve Bank of Australia Assistant Governor Christopher Kent
Headlines via Reuters:
RBA to adopt an ample reserves system for monetary policyTo use open market
repo operations at a price near the cash rate targetTo offer repos in
full allotment auctionsSupply of reserves
can rise and fall in line with changes in demandRBA could also
supply reserves via purchases of short-dated government bonds and/or
fx swapsCan respond to
market stresses if needed, including by conducting OMO more
frequently than once a weekWill end the current
‘floor’ system with an excess of reservesRBA’s balance
sheet will be no larger than needs to be in order to implement
monetary policyNo change to current
rundown of balance sheet by holding bonds to maturityPublic 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.