When financial market participants understand how a central bank is likely to react to incoming information, asset prices should adjust in ways that anticipate the central bank’s expected policy actions, enhancing the monetary policy transmission mechanism and thereby supporting the central bank’s attainment of its objectives.
So balance sheet metrics – which are affected by our efforts to influence a wide range of interest rates in the economy – can provide useful additional insights into the stance of policy. Most obviously, the provision of liquidity, purchasing of government bonds, and funding provided under the TFF, involve expanding the size of the Reserve Bank's balance sheet (Graph 3).