Karen Silk: Liquiditiy - one word, three meanings

Keynote speech by Ms Karen Silk, Assistant Governor and General Manager for Economics, Financial Markets and Banking of the Reserve Bank of New Zealand, to KangaNews New Zealand Dept Capital Market Summit 2023, Auckland, 13 September 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

E nga ngā mana, e ngāa reo. E ngāa karanga maha o te wā.

Tēnā koutou, tēnā koutou, tēnā koutou katoa,

Good morning. It's wonderful to see so many familiar faces at this event, which has become a staple of the New Zealand capital markets calendar. I am grateful to KangaNews for their continued efforts to support debt capital markets in New Zealand and to all the sponsors who help to make this event possible. I am also grateful for the opportunity to speak to you today, for the second time at this event in as many years.

Let me begin within a familiar disclaimer. As most of you will be aware, I am a member of the Reserve Bank's Monetary Policy Committee. In my remarks today I will briefly touch on an aspect of monetary policy transmission. However, this speech is not an MPC communication and contains no guidance on the future path of monetary policy. The latest views of the MPC can be found in our recently published Monetary Policy Statement.

My topic today – Liquidity. It references what might be one of the most used words in the financial markets lexicon. But it is a word with many meanings.

In the most quoted lines of Samuel Taylor Coleridge's Rime of the Ancient Mariner, the sailor recounts being becalmed in the doldrums, his ship surrounded by water, but none of it of the drinking kind.

Consider a 21st century reimagining of this tale, within the context of financial markets. Instead of a seafarer, it features a fixed income trader. Our protagonist might bemoan that markets are awash in liquidity but that they are not able to execute a trade.