Monetary Policy Strategy in New Zealand

A clear and effective strategy can play a significant role in helping monetary policy decision makers to achieve their objectives. This article outlines a framework for monetary policy strategy in New Zealand. It discusses the underlying principles of effective strategy in the context of a flexible inflation targeting regime and articulates the Reserve Bank of New Zealand’s monetary policy strategy during the inflation targeting period. On 1 April 2019, amendments to New Zealand’s monetary policy framework came into effect. Changes to the Reserve Bank of New Zealand Act 1989 added an employment objective to the Reserve Bank’s long-standing price stability objective, and created a formal Monetary Policy Committee with members internal and external to the Bank. Therefore, it is timely to take stock of the Bank’s current monetary policy strategy, which will provide a platform from which the Monetary Policy Committee’s strategy can be developed.