Daily Flows

• ES balances represent funds held by commercial banks at the RBA, serving as a key indicator of overall liquidity in the banking system.
• Since 1 January, ES balances have contracted by $38 million, indicating a gradual liquidity drain in the system.
• While this movement is not yet significant, if the trend continues, it could lead to increased demand for funding through the issuance of TDs, NCDs, and MTNs.

Trump Seeks to End Ukraine War – Inflationary or Deflationary?

• Overnight, Trump engaged with Vladimir Putin in an effort to negotiate an end to the Russia-Ukraine conflict.
• A resolution to the war could have significant global implications, particularly for inflation and monetary policy.
• Deflationary effects could include lower energy prices if sanctions on Russian exports are lifted, cheaper grain prices, and reduced military spending.
• Potential inflationary pressures could arise from a reconstruction boom to rebuild war-affected areas and supply chain disruptions as companies readjust to Russia’s reintegration into global trade.
• The RBA closely monitors geopolitical developments and continues to assess their potential impact on monetary policy settings.