The Reserve Bank of Australia has adjusted liquidity measures put in place at the onset of the pandemic to help banks access funds should they need them, in another step towards policy normalisation.
Christopher Kent, assistant governor for financial markets at the RBA, said that given the reduced demand for liquidity, the central bank had shortened its preferred OMO terms to between one month and three months, with the average term to maturity declining to about seven weeks. The frequency of OMO will also be reduced to weekly, from daily.
“They remain an important part of the Reserve Bank’s framework. OMO are a source of short-term liquidity for individual financial institutions and can quickly help to relieve pressures in short-term money markets in the event of any unforeseen tightening in liquidity conditions,” he said.The RBA terminated its $350 billion bond purchase program this month and has yet to decide about the reinvestment of maturing proceeds.