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Liquidity management in the New Zealand banking system

Jan Frazer

This article provides an overview of how the Reserve Bank (the Bank) conducts liquidity management. It describes the two areas of liquidity management conducted by the Bank - what the Bank does to maintain a stable and sufficient supply of system liquidity and what it does to ensure individual banks have access to liquidity to meet daily transactional obligations through the payments and settlement system. It also explains how the Bank supports its monetary policy implementation by managing the level of liquidity in the banking system so as to avoid large fluctuations in short-term interest rates.