Effective monetary policy requires transparency
(08 March 2013 – New Zealand) Robust decision-making processes and clear communication are essential for effective monetary policy, the governor of the Reserve Bank of New Zealand (RBNZ) Graeme Wheeler said on Thursday.
In a speech to the University of Auckland Business School, Wheeler said global financial markets are still dealing with the major regulatory changes and the massive adjustments taking place in government, corporate, financial sector and household balance sheets.
"The spill-overs from these adjustments, and the fiscal and monetary responses to them, can be especially challenging in small open economies with stronger growth prospects, and where there are high expectations of what central banks can achieve."
Wheeler said the RBNZ endeavours to provide an accurate assessment of the implications and challenges of these adjustments for the New Zealand economy, while being clear about what it can and cannot influence.
Measures to ensure transparency include the publication of an official cash rate (OCR) projection in the central bank’s quarterly Monetary Policy Statement, to help businesses and households plan with greater confidence, and shape expectations about the future path of interest rates.
The RBNZ recently established a Governing Committee, comprising its team of governors, who will debate major policy matters leading to decisions, Wheeler said.
"While establishing this Committee represents a management change rather than a governance initiative, the Governing Committee will maximise the knowledge and experience of the Governors individually and, as a collective, rigorously test ideas and build consensus around major policy decisions. The Governor remains solely accountable for those decisions under the Reserve Bank Act."
Wheeler said communicating policy decisions is equally as important, and the RBNZ’s communications programme will also be expanded to include more on-the-record speeches, and use a wider range of Bank speakers and communication channels, to help broaden understanding of the Bank’s policy choices and tools.
"The spill-overs from these adjustments, and the fiscal and monetary responses to them, can be especially challenging in small open economies with stronger growth prospects, and where there are high expectations of what central banks can achieve."
Wheeler said the RBNZ endeavours to provide an accurate assessment of the implications and challenges of these adjustments for the New Zealand economy, while being clear about what it can and cannot influence.
Measures to ensure transparency include the publication of an official cash rate (OCR) projection in the central bank’s quarterly Monetary Policy Statement, to help businesses and households plan with greater confidence, and shape expectations about the future path of interest rates.
The RBNZ recently established a Governing Committee, comprising its team of governors, who will debate major policy matters leading to decisions, Wheeler said.
"While establishing this Committee represents a management change rather than a governance initiative, the Governing Committee will maximise the knowledge and experience of the Governors individually and, as a collective, rigorously test ideas and build consensus around major policy decisions. The Governor remains solely accountable for those decisions under the Reserve Bank Act."
Wheeler said communicating policy decisions is equally as important, and the RBNZ’s communications programme will also be expanded to include more on-the-record speeches, and use a wider range of Bank speakers and communication channels, to help broaden understanding of the Bank’s policy choices and tools.
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