RBA Outlines Shift to Demand-Driven Liquidity Regime

David Jacobs, Head of Domestic Markets at the Reserve Bank of Australia (RBA), delivered a speech detailing the RBA's transition to a new monetary policy implementation regime. He indicated that as reserves decline, short-term rates will increasingly be influenced by the cost of obtaining reserves, rather than the return on holding them. The banking system is expected to determine the quantity of reserves through Open Market Operations (OMOs). Banks' expectations for ample reserves have decreased from an estimated $100–200 billion in 2024 to approximately $70–100 billion.