How the Reserve Bank of New Zealand manages liquidity for monetary policy implementation

Release date
Vol. 79. No. 9. May 2016
Sandeep Parekh

This article provides an overview of how the Reserve Bank (the Bank) conducts liquidity management to implement monetary policy. It explains how the Bank manages the level of liquidity in the banking system to ensure short-term interest rates trade close to the Official Cash Rate (OCR). It also 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 (including the challenges we face); and how the Bank ensures that individual banks have access to liquidity to meet daily transactional obligations through the payments and settlement system.