TFF kills RBA cash rate

Via Banking Day:

A significant shift in the framework of the Reserve Bank of Australia’s monetary policy is underway that could culminate into the Term Funding Facility becoming the effective instrument for implementing monetary policy and making the cash rate target almost redundant for the next few years.

The interest rate corridor system of implementing monetary policy will remain but the width could narrow further, and the determinants of the width would be almost entirely based on the TFF. The rate on the TFF would determine the higher end of the corridor, and the amount of TFF would determine the lower end because surplus balances in Exchange Settlement account would be mainly due to TFF.

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