The Reserve Bank uses monetary policy to maintain price stability as defined in the Policy Targets Agreement (PTA). The current PTA requires the Bank to keep inflation between 1 and 3 percent on average over the medium term. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.

About Monetary Policy

About Monetary Policy provides introductory fact sheets on monetary policy, a number of papers discussing the adoption of the Official Cash Rate to implement monetary policy, and articles explaining the impacts of monetary policy on the economy.

Policy Targets Agreement

The Reserve Bank Act requires that price stability be defined in a specific and public contract, negotiated between the Minister of Finance and the Reserve Bank. This is called the Policy Targets Agreement.

Monetary Policy Statement

The Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly. Each Statement describes:

• How the Bank proposes to achieve its targets.
• How the Bank proposes to formulate and implement monetary policy during the next five years.
• How monetary policy has been implemented since the last MPS.

Reserve Bank's Macro Model (FPS)

At the core of the Reserve Bank's Forecasting and Policy System (FPS) is a general equilibrium macro model with around 30 key behavioural variables. The model is used to help formulate the Bank's economic projections and is also used in a variety of research applications.

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