RBA's markets head Jacobs goal is a system that can flexibly supply whatever quantity the banking system demands, while keeping the cash rate close to the board's target

• As reserves become more demand driven active liquidity management will become more important for financial institutions.

Remarks of this kind sit within the RBA's ongoing review of how it implements monetary policy, specifically the choice between staying with an ample-reserves, demand-driven system and returning to a scarce-reserves corridor of the kind it ran before the balance sheet expansion. Under the demand-driven model the central bank supplies reserves elastically at the target, so the cash rate is anchored by rates paid on exchange settlement balances rather than by daily open market operations to hit a quantity. Other central banks that have run down large balance sheets have confronted the same question, and the general pattern is that systems with abundant reserves rely on the deposit rate as the operative floor while money-market rates trade in a narrow band around it. The practical tell is in short-dated funding markets: whether interbank and repo rates hold close to target without intervention, and whether banks' demand for reserves proves stable as the balance sheet shrinks. Comments about active liquidity management becoming more important for institutions signal an expectation that banks, not the central bank, do more of the day-to-day reserve management. Follow-ons are any formal decision on the future operating framework and the pace at which excess reserves are allowed to decline.