MNI BRIEF: RBA To Publish Framework On Additional Policy Tools
MNI (SYDNEY) - The Reserve Bank of Australia will publish a framework for additional monetary policy tools next year following a review of its actions during the pandemic and its use of the AUD188 billion Term-Funding Facility, according to Assistant Governor Chris Kent.
In a presentation delivered at the RBA, Kent noted the board would likely consider using a tool such as the TFF again in extreme circumstances, “when the cash rate target had been lowered to the full extent possible.”
“But it would do so only after consideration of a wide range of scenarios and the associated risks, and with a broader range of operational options than were available at the time of the pandemic,” he added.
Kent noted the development of the TFF had occurred rapidly, without the ability to fully consider risks. The RBA would aim to forward plan future options to weigh costs better, consider competition implications in the banking sector and strengthen its risk management.
"Including by examining a wide range of economic scenarios when making policy decisions involving unconventional tools, and how to judge appropriate exit paths from such tools," he continued. "In retrospect, a greater focus on potential upside economic outcomes could have led to a different calibration of the TFF, including deciding not to extend it in September 2020."