This section provides a variety of resources that explain how the Reserve Bank uses monetary policy to maintain price stability.
The Reserve Bank’s economic model is intended to illustrate how our economy works and provide a framework for the Bank’s economists to think about what is happening within it and where the economy, and inflation, may be heading next. It shows the total amount of goods and services produced in our economy, or our Gross Domestic Product.
Each quarterly Monetary Policy Statement that the Reserve Bank releases includes the Bank’s projections (or forecasts) for the future. These forecasts paint a picture of where the Bank economists think the New Zealand economy, inflation and interest rates are heading over the next few years.
Governor Graeme Wheeler explains the Bank's monetary policy decision-making process, and the essential role of the Governing Committee. September 2015.
Explaining Monetary Policy (PDF
This brochure explains what monetary policy is, and how the Reserve Bank implements it.
A fact sheet explaining what inflation and deflation are in the context of New Zealand.
What is the Official Cash Rate?
A fact sheet outlining the instrument that the Reserve Bank uses to implement monetary policy.
What is the Policy Targets Agreement?
This page explains the contract negotiated between the Reserve Bank and the Minister of Finance that defines price stability.
and the New Zealand system: an historical perspective (PDF 1.2MB) by Neil P.
A discussion paper from 1992 provides some analysis of the various monetary and regulatory regimes used in New Zealand since the nineteenth century.
View the analysis of interest rate margins (PDF 162KB)
Evaluating monetary policy
It is important that central banks are accountable for their conduct of monetary policy. This article outlines a conceptual framework for evaluating monetary policy based on the principles of flexible inflation targeting. A central bank should make full use of all relevant information, and learn from new information and forecast errors as these come to light.
Bulletin Vol. 78, No. 7 November 2015 (PDF 1MB)
Proposed instrument change
A discussion document released in March 1997 proposing a change in the instrument used to implement monetary policy, from targeting settlement cash balances to targeting the overnight interbank interest rate (the cash rate).
Review of submissions and
A discussion document released in June 1997 isolating the key issues addressed in examining the proposal to change instruments, and explaining the reasons for the resulting decision.
Changes to operating procedures (PDF
This Bulletin article reproduces the document released on 8 February 1999, in which the Bank announced its intention to adopt an official cash rate as its primary instrument for implementing monetary policy.
Reserve Bank Bulletin Vol. 62 No. 1
A cash rate system for implementing
monetary policy (PDF 222KB)
This Bulletin article explains in greater depth a number of considerations relevant to the decision announced on 8 February 1999 to adopt an Official Cash Rate as the Bank’s primary instrument for implementing monetary policy.
Reserve Bank Bulletin Vol. 62 No. 1
Independent Review of the Operation of Monetary Policy
In May 2000, the government initiated a review of New Zealand’s monetary policy framework. Professor Lars Svensson of Stockholm University was appointed to conduct the review and to report by the end of February 2001. This section provides information related to the review, including Professor Svensson’s report.
The Reserve Bank released its submission to the
Finance and Expenditure Committee’s Inquiry into the Future Monetary
27 July 2007
The Reserve Bank Board of Directors have made a separate submission (PDF 46KB) to the Finance and Expenditure
Committee’s Inquiry into the Future Monetary Policy
30 July 2007
This submission is in three sections. The first
section begins by looking at trends in housing affordability. The second
section of the submission looks at the drivers of house prices. The third
section of the submission looks at whether there are any areas that might
warrant policy attention from government. The submission includes background
material and some policy suggestions which, it is hoped, will be of help to the
A Mortgage Interest Levy, a detailed option
A report prepared by the Reserve Bank and Treasury, and provided to the Minister of Finance, outlining in greater detail the option of a Mortgage Interest levy as a supplementary tool to assist monetary policy, was released on 23 February 2007. The report is also available as a PDF (110KB). Also released was the accompanying letter to the Minister of Finance.
Supplementary Stabilisation Instruments
(SSI) report released
On 6 April 2006 the Reserve Bank and the Treasury released a joint report (PDF 276KB) on possible additional tools to supplement the role of interest rates in managing demand pressures and inflation. Also released was a letter to the Minister of Finance, providing a summary of the report and recommendations.
Reference to investigate supplementary instruments
A terms of reference was released on 10 November 2005 for a joint Reserve Bank/Treasury project to investigate supplementary instruments that could be used to complement monetary policy in the task of containing inflation pressures.
Want to know how much a house worth $50,000 in 1973 is worth in today’s money when adjusted for inflation? Or what a loaf of bread worth $4.50 today would’ve been worth in 1986 when adjusted for inflation?