FOMC Preview: Uncertainty, Likely 25bp Hike, Maybe Pause

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. To improve the swap lines' effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April. The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses. tweet at 5:07pm: US FEDERAL RESERVE: THE SWAP LINES HELP TO ALLEVIATE PRESSURES ON THE AVAILABILITY OF CREDIT TO HOUSEHOLDS AND BUSINESSES. tweet at 5:05pm: US FEDERAL RESERVE: DAILY OPERATIONS WILL BEGIN ON MONDAY AND WILL LAST AT LEAST UNTIL THE END OF APRIL.

tweet at 4:36pm: PUTIN SAYS RUSSIA IS OPEN TO DIPLOMATIC SETTLEMENT OF UKRAINE CRISIS BUT REJECTS ULTIMATUMS tweet at 4:35pm: PUTIN SAYS RUSSIA IS GRATEFUL FOR CHINA'S BALANCED LINE ON EVENTS IN UKRAINE PUTIN SAYS RUSSIA WELCOMES CHINESE WILLINGNESS TO PLAY CONSTRUCTIVE ROLE IN SOLVING UKRAINE CRISIS

It’s great to be back at the KangaNews Summit. Last year I discussed the Reserve Bank’s move to quantitative tightening (QT). Today I’ll provide a brief update on the unwinding of our unconventional policies before turning to more conventional monetary policy issues, which will be the focus of my presentation. We are currently pursuing passive QT, whereby we allow our holdings of government bonds to roll off as they mature. The next maturity of substance is $13 billion of the April 2023 Australian Government bond. Some central banks have slowed QT by reinvesting some of their maturing bonds; others have done the opposite, pushing QT along by selling bonds well ahead of maturity. While QT will contribute to a moderate decline in our balance sheet over the next few years, the roll-off of the Bank’s Term Funding Facility (TFF) will lead to a sizeable reduction in our balance sheet this year and next (Graph 1). tweet at 6:05pm: RBA'S KENT: BOARD WILL RESPOND AS NECESSARY TO BRING INFLATION BACK TO TARGET IN A REASONABLE TIME #News #Markets #RBA #INFLATION #capitalhungry tweet at 6:07pm: RBA's Kent: Likely To Take Longer Than Usual To See The Full Effect Of Higher Interest Rates On Households

tweet at 6:42pm: RBA ASSISTANT GOV KENT: WHEN DECIDING ON RATES, THE BOARD WILL CONSIDER FINANCIAL CONDITIONS. tweet at 6:41pm: Rba assistant gov kent: the global banking system is much stronger than it was ten years ago. tweet at 6:41pm: RBA ASSISTANT GOV KENT: THE PROBLEMS STEM FROM A FEW INSTITUTIONS THAT WERE POORLY MANAGED.