RBA’s Kent: No change to current rundown of balance sheet

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.