26 January 2001
In a speech to the Canterbury Employers' Chamber of Commerce, Dr Brash said he was doing this to dispel criticism that the Reserve Bank "is insufficiently in touch with the `real world', or that it is excessively `ivory tower' or academic." Dr Brash also said he wanted to show that, while the Reserve Bank Act requires that he alone makes the Reserve Bank's monetary policy decisions, considerable care had been taken to create processes and structures to ensure that he receives comprehensive and balanced advice before decisions are taken.
Dr Brash told the gathering that an eight-week process is used in preparing the Bank's quarterly Monetary Policy Statements and making the interest rate decisions that go with that.
As the speech outlined:
- In weeks one and two, Reserve Bank economists typically visit or contact 40 to 50 businesses and sector groups to see first-hand how the economy is evolving.
- In weeks two and three, staff undertake intensive analysis of all available statistical data.
- In week four, the Bank reviews developments in the international data. Also in week four, Bank staff develop alternative interpretations of the current and prospective economic situation, testing the cases for both more and less aggressive monetary policy approaches.
- In week five, the Bank's Economics Department presents draft economic forecasts to the Bank's Monetary Policy Committee (MPC) for detailed consideration. These forecasts are adjusted and agreed, so that by that Friday a subset of the MPC advises Dr Brash on what the interest rate adjustment, if any, should be. Dr Brash makes a provisional decision, subject to revision later if required.
- In weeks six, seven and eight, the Monetary Policy Statement is drafted and published.
Dr Brash said that this framework had evolved over recent years, with improvements being constantly sought. For that reason, the Reserve Bank was looking forward to the results of the review of monetary policy being conducted by Professor Lars Svensson in order to identify what further improvements could be made.
For further information contact
Corporate Affairs Manager
Ph 04 471 3671, 021 497 418, home 04 938 8177, Jackmanp@rbnz.govt.nz