Rates Spark: Bear flattening pressure persists, for now

Thank you for coming to the Reserve Bank’s offices today. I will talk about a review we have published on the Term Funding Facility (TFF).[1] This is the fourth instalment of the series of reviews of unconventional policy tools the RBA used during the COVID-19 pandemic.[2] In March 2020, the economic outlook was bleak and highly uncertain (Graph 1), financial markets were in turmoil, and there was limited scope to lower the cash rate further. In that environment, the RBA pursued a package of policies to support the economy.[3] The TFF review considers how that element of the package worked, whether it achieved its aims, and lessons for the future. I will cover the key points but there is a lot of detail in the review itself. post: RBA'S KENT: TOTAL COST OF THE TFF TO RBA IS ESTIMATED TO HAVE BEEN $9 BILLION post: RBA'S KENT: A TERM LENDING TOOL OF THIS KIND WOULD BE WORTH CONSIDERING AGAIN IF WARRANTED BY EXTREME CIRCUMSTANCESReview of the Term Funding Facility In March 2020, the Reserve Bank Board announced the Term Funding Facility (TFF) as part of a comprehensive policy package to support the Australian economy in response to the COVID-19 pandemic, at a time when wholesale funding markets had been significantly disrupted. The goals of the TFF were twofold: to reinforce the benefits to the economy of a lower cash rate, by reducing banks’ funding costs and in turn helping to reduce borrowing rates to encourage banks to lend to businesses, particularly small and medium-sized enterprises. To deliver this, the TFF provided low-cost, fixed-rate three-year funding to banks operating in Australia against high-quality collateral. After one extension, the TFF ultimately provided $188 billion of funding, equivalent to 6 per cent of the stock of credit outstanding. It was closed to new drawdowns at the end of June 2021 and the final funding matured as planned in mid-2024. This review examines the TFF and draws some key lessons. It focuses on the effectiveness of the TFF in delivering its goals, rather than evaluating the overall policy stance chosen by the Reserve Bank Board. It complements the reviews of the other unconventional monetary policy (UMP) tools that the RBA used during the pandemic.[1] The key points of the review are: The policy goals of the TFF were met. The three-yea

Thank you, President Hicks and Tara Boehmler, for the kind introduction.1 Let me start by saying that I am saddened by the tragic loss of life, destruction, and damage resulting from Hurricane Helene in North Carolina, and throughout this region. My thoughts are with the people and communities affected, including those in the Davidson College family. For our part, the Federal Reserve and other federal and state financial regulatory agencies are working with banks and credit unions in the affected area to help make sure they can continue to meet the financial services needs of their communities. I am happy to be back at Davidson College. This is a special community. I am bound to it by a shared experience defined not by its length, but by its intensity. As I visited with you today, and as I look around this hall, I see the faces of colleagues who became dear friends during the COVID-19 pandemic. Back then, we spoke often about the unprecedented uncertainty we faced. Amidst that uncertainty, however, we supported each other on this campus. Now, looking back, we can attest that this mutual support was vital. I am grateful to have been amongst you during that unprecedented time. Today, I am proud to see that Davidson is stronger than ever. I am excited to be here with you this evening and to talk to you about the history of the Federal Reserve's discount window.2 The discount window is one of the tools the Fed uses to support the liquidity and stability of the banking system, and to implement monetary policy effectively. It was created in 1913 when the Fed was established. Today, more than 110 years later, this tool continues to play an important role. At the Fed, we always look for ways to improve our tools, including our discount window operations. Recently, the Fed published a request for information document to receive feedback from the public regarding operational aspects of the discount window and intraday credit.3 Today, I will do three things. First, I will discuss briefly my outlook for the U.S. economy. Second, I will offer my historical perspective on the discount window, starting in 1913 and ending in 2000. Finally, I will provide a few details about the request for information the Fed recently published. post: JEFFERSON FROM FED: EMPLOYMENT AND INFLATION GOALS ROUGHLY BALANCED post: JEFFERSON ANTICIPATES INFLATION WILL KEEP TRENDING TOWARDS 2%