RBA Transition to Ample-Reserves Framework Remains Ongoing

The Reserve Bank of Australia (RBA) is still in the process of transitioning to an ample-reserves framework, and there's no fixed timeline for reaching equilibrium.

According to David Jacobs, Head of Domestic Markets at the RBA, market behavior will indicate when reserves reflect banks' underlying demand rather than pandemic-era asset holdings.

Jacobs cautioned that demand could move either way, underscoring the need for flexibility in managing liquidity.

The new system involves supplying liquidity as required to keep the cash rate near the board's target, and full-allotment open market operations will anchor this approach.