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Article: Interpreting clause 4(b) of the Policy Targets Agreement: avoiding unnecessary instability in output, interest rates and the exchange rate.(Articles)
- Article from:
- The Reserve Bank of New Zealand Bulletin
- Article date:
- June 1, 2004
- Author:
CopyrightCOPYRIGHT 2004 Reserve Bank of New Zealand. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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In clause 2(b) of the Policy Targets Agreement (PTA) between the Minister of Finance and Governor of the Reserve Bank, the target used to direct the Reserve Bank's pursuit of price stability is expressed as "future CPI inflation outcomes between 1 per cent and 3 per cent on average over the medium term." While the Reserve Bank has the independence to choose when and how to adjust policy settings so as to achieve the target, another clause of the PTA provides guidelines as to how this freedom should be used. In clause 4(b) of the PTA, the Minister of Finance and the Governor agree that, in using monetary policy to pursue price stability, the Bank shall take account of the ...