RBA Shifts Focus from Reserves Control

RBA Head of Domestic Markets David Jacobs has outlined the central bank's vision for managing Australia's monetary policy. According to Jacobs, the RBA aims to transition from controlling the quantity of reserves to a system where the banking system can flexibly supply whatever quantity it demands. This would allow the cash rate to remain close to the board's target.

The Reserve Bank of Australia sets interest rates and manages monetary policy for Australia. Its primary mandate is to maintain price stability, which means an inflation rate of 2-3%. The RBA uses various tools to achieve this, including raising or lowering interest rates, quantitative easing, and tightening.