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Domestic markets

We are responsible for ensuring that short-term interest rates are near the Official Cash Rate and for supplying enough settlement cash so that banks can settle payments that occur throughout the New Zealand economy.

Our role in domestic markets

As New Zealand’s central bank, we are responsible for the implementation of monetary policy. The Monetary Policy Committee (MPC) sets the level of the Official Cash Rate (OCR) and we ensure that short-term market interest rates actually trade at that level.

We are also responsible for providing facilities to manage liquidity. We manage liquidity in the banking system by making sure that there is enough settlement cash for payment and settlement needs. This promotes stability in the New Zealand financial system.

We provide settlement accounts for banks and other financial institutions through the Exchange Settlement Account System (ESAS). We also provide the Government with a settlement account, called the Crown Settlement Account (CSA), for managing government expenditure and revenue flows.

The total sum of account balances in ESAS is referred to as the settlement cash level. Banks can raise or lower their own ESAS account balances, and the Crown can impact settlement cash through expenditure payments and revenue receipts to and from the CSA. We determine the total settlement cash level through our operations and facilities.