Jefferson: A History of the Fed's Discount Window: 1913–2000

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