Monetary Policy Statement February 2020 | 12 feb 2020
Statement of the MPC’s monetary policy strategy
The Monetary Policy Committee’s (MPC) monetary policy strategy is its overarching plan for how it will formulate monetary policy under different circumstances to achieve its objectives.1 It outlines a consistent approach to how the MPC intends to achieve its objectives across time, accounting for trade-offs and uncertainty. Agreeing on and publishing a strategy promotes transparency, public understanding, and accountability.
Monetary policy framework and objectives Under the Reserve Bank of New Zealand Act 1989 (the Act), the MPC is responsible for formulating monetary policy to maintain a stable general level of prices over the medium term and to support maximum sustainable employment.2 Operational objectives for monetary policy are set out in the Remit. The current Remit sets out a flexible inflation targeting regime, under which the MPC must set policy to:
• keep future annual inflation between 1 and 3 percent over the medium term, with a focus on keeping future inflation near the 2 percent midpoint; and
• support maximum sustainable employment, considering a broad range of labour market indicators and taking into account that maximum sustainable employment is largely determined by non-monetary factors
In pursuing these objectives, the Remit requires the MPC to have regard to the efficiency and soundness of the financial system, seek to avoid unnecessary instability in the economy and financial markets, and discount events that have only transitory effects on inflation. The Reserve Bank’s flexible inflation targeting framework and the MPC’s monetary policy strategy reflect the fact that:
• low and stable inflation is monetary policy’s best long-run contribution to the well-being of New Zealanders;
• in the short to medium term, monetary policy can influence real variables such as employment, and hence policy trade-offs can arise; and
• monetary policy is more effective if the Bank’s policy targets are credible, so policy should be formulated in a way that ensures credibility is maintained.
Key aspects of monetary policy strategy The MPC practises forecast targeting, which means that it sets monetary policy such that it expects to achieve its inflation and employment goals in the medium term. In most instances the MPC aims to return inflation to the target mid-point within a one to three year horizon. The appropriate horizon at each policy decision will vary based on how different policy paths will contribute to maximum sustainable employment, whether price-setters’ expectations are consistent with the inflation target, and other considerations such as the balance of risks to the MPC’s central economic outlook. The MPC does not attempt to return inflation and employment to target immediately, because monetary policy actions take time to transmit through the economy. Attempting to return inflation to target too quickly would result in unnecessary instability in the economy and financial markets. The 1 to 3 percent target range for inflation provides the MPC with flexibility to ensure that managing inflation variability does not come at the cost of excessive variability in the real economy. For similar reasons, the MPC does not attempt to offset events that are expected to have only transitory effects on inflation. The MPC takes into account both its inflation and employment objectives when setting policy. In the long run, no trade-off exists between the MPC’s objectives. In the short to medium term, there may be situations where monetary policy can move one objective closer to target only at the cost of the other, resulting in a trade-off. When a trade-off does arise, the MPC will consider outcomes for both objectives in setting policy. In general, if employment is projected to be below its long-run sustainable level, the MPC would let inflation overshoot the target mid-point for a time, and vice versa. The MPC responds to both deviations above target and deviations below target. The MPC sets policy to stabilise employment near its maximum sustainable level, and to return inflation to the 2 percent target .
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The Monetary Policy Committee’s (MPC) monetary policy strategy is its overarching plan for how it will formulate monetary policy under different circumstances to achieve its objectives.1 It outlines a consistent approach to how the MPC intends to achieve its objectives across time, accounting for trade-offs and uncertainty. Agreeing on and publishing a strategy promotes transparency, public understanding, and accountability.
Monetary policy framework and objectives Under the Reserve Bank of New Zealand Act 1989 (the Act), the MPC is responsible for formulating monetary policy to maintain a stable general level of prices over the medium term and to support maximum sustainable employment.2 Operational objectives for monetary policy are set out in the Remit. The current Remit sets out a flexible inflation targeting regime, under which the MPC must set policy to:
• keep future annual inflation between 1 and 3 percent over the medium term, with a focus on keeping future inflation near the 2 percent midpoint; and
• support maximum sustainable employment, considering a broad range of labour market indicators and taking into account that maximum sustainable employment is largely determined by non-monetary factors
In pursuing these objectives, the Remit requires the MPC to have regard to the efficiency and soundness of the financial system, seek to avoid unnecessary instability in the economy and financial markets, and discount events that have only transitory effects on inflation. The Reserve Bank’s flexible inflation targeting framework and the MPC’s monetary policy strategy reflect the fact that:
• low and stable inflation is monetary policy’s best long-run contribution to the well-being of New Zealanders;
• in the short to medium term, monetary policy can influence real variables such as employment, and hence policy trade-offs can arise; and
• monetary policy is more effective if the Bank’s policy targets are credible, so policy should be formulated in a way that ensures credibility is maintained.
Key aspects of monetary policy strategy The MPC practises forecast targeting, which means that it sets monetary policy such that it expects to achieve its inflation and employment goals in the medium term. In most instances the MPC aims to return inflation to the target mid-point within a one to three year horizon. The appropriate horizon at each policy decision will vary based on how different policy paths will contribute to maximum sustainable employment, whether price-setters’ expectations are consistent with the inflation target, and other considerations such as the balance of risks to the MPC’s central economic outlook. The MPC does not attempt to return inflation and employment to target immediately, because monetary policy actions take time to transmit through the economy. Attempting to return inflation to target too quickly would result in unnecessary instability in the economy and financial markets. The 1 to 3 percent target range for inflation provides the MPC with flexibility to ensure that managing inflation variability does not come at the cost of excessive variability in the real economy. For similar reasons, the MPC does not attempt to offset events that are expected to have only transitory effects on inflation. The MPC takes into account both its inflation and employment objectives when setting policy. In the long run, no trade-off exists between the MPC’s objectives. In the short to medium term, there may be situations where monetary policy can move one objective closer to target only at the cost of the other, resulting in a trade-off. When a trade-off does arise, the MPC will consider outcomes for both objectives in setting policy. In general, if employment is projected to be below its long-run sustainable level, the MPC would let inflation overshoot the target mid-point for a time, and vice versa. The MPC responds to both deviations above target and deviations below target. The MPC sets policy to stabilise employment near its maximum sustainable level, and to return inflation to the 2 percent target .
I am a financial consultant in forex ,Comex and Indices market we help traders to make safe and consistent returns..For more Market Analysis and trading recommendations Ping me on Telegram: https://t.me/forexpersonalguider
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live forex signal
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What is the best Forex signal Telegram group?
#oman #lebanon #croatia #Argentina #Brazil #suriname #EGYPT #SaudiArabia #cx #Ukraine #egypt #hongkong #australia #cambodia #germany #Russia #forexsignal #forextrader #stoploss #gold #makemoney #Thailand #Kuwait #Dubai #USA #UAE #Saudi #Europe #Malaysia #Singapore #Opec #London #UK #Unitedkingdom #forex #FX #trading #forexsignals #forextrading #ForexNews #FXTrading #FXTrader #ForexTips #signalservice #makemoney #USDJPY #EURUSD #GBPUSD #USDCHF #AUDUSD #NZDUSD #Profit #FXCurrency #Pips #forexmanagement #money #trading #forextrader #investing #luxury #investment
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