At a Bloomberg event in Sydney, Reserve Bank of Australia (RBA) Assistant Governor Chris Kent outlined significant forthcoming changes to the country's monetary policy framework. Kent announced plans to begin consultations with the public and market participants soon, emphasizing the RBA's readiness to respond to market stresses, including the possibility of conducting open market operations (OMO) more frequently than once a week. The RBA intends to transition from the current 'floor' system, which maintains an excess of reserves, to an ample reserves system, similar to those used by the European Central Bank, Bank of England, and Riksbank. This approach will allow the supply of reserves to fluctuate with changes in demand and could involve the purchase of short-dated government bonds and/or foreign exchange swaps. Kent reassured that the RBA's balance sheet would be no larger than necessary for implementing monetary policy, with no change to the current strategy of holding bonds to maturity. Additionally, the RBA plans to use open market repo operations at a price near the cash rate target and offer repos in full allotment auctions.
RBA’s Kent: RBA To Adopt Ample Reserves System To Implement MonPol - Ample Reserves System Similar To ECB, BoE, Riksbank - Decision Doesn’t Have Implications For MonPol Stance, Approach To QT https://t.co/Tq3ha925mJ
RBA'S KENT: PUBLIC CONSULTATION AND LIAISON WITH MARKET PARTICIPANTS WILL COMMENCE SHORTLY
RBA'S KENT: RBA’S BALANCE SHEET WILL BE NO LARGER THAN NEEDS TO BE IN ORDER TO IMPLEMENT MONETARY POLICY || SAYS NO CHANGE TO CURRENT RUNDOWN OF BALANCE SHEET BY HOLDING BONDS TO MATURITY
RBA'S KENT: CAN RESPOND TO MARKET STRESSES IF NEEDED, INCLUDING BY CONDUCTING OMO MORE FREQUENTLY THAN ONCE A WEEK || SAYS WILL END THE CURRENT ‘FLOOR’ SYSTEM WITH AN EXCESS OF RESERVES
RBA'S KENT: SUPPLY OF RESERVES CAN RISE AND FALL IN LINE WITH CHANGES IN DEMAND || SAYS RBA COULD ALSO SUPPLY RESERVES VIA PURCHASES OF SHORT-DATED GOVERNMENT BONDS AND/OR FX SWAPS
RBA'S KENT: TO OFFER REPOS IN FULL ALLOTMENT AUCTIONS
RBA'S KENT: TO USE OPEN MARKET REPO OPERATIONS AT A PRICE NEAR THE CASH RATE TARGET
RESERVE BANK OF AUSTRALIA ASSISTANT GOV KENT: RBA TO ADOPT AN AMPLE RESERVES SYSTEM FOR MONETARY POLICY
🔴 RBA'S KENT: CONSULTATION WITH PUBLIC AND MARKET PARTICIPANTS TO BEGIN SOON
RBA Assistant Governor Chris Kent speaks at a Bloomberg event in Sydney today. Read today's Australia Briefing, by Jackie Edwards for your daily dose of the best of Bloomberg from Down Under and around the world. https://t.co/9b42mQNyrr