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How the Reserve Bank implements monetary policy

This Bulletin provides an overview of how the Reserve Bank of New Zealand implements monetary policy and manages settlement cash in the banking system.

Monetary policy implementation

The Monetary Policy Committee sets the stance of monetary policy by adjusting the level of the Official Cash Rate (OCR). This determines whether monetary policy is a “headwind” or “tailwind” for economic activity and inflation. But for the OCR to affect the economy, it must first transmit through New Zealand’s financial system. 

We ensure effective monetary policy implementation through a framework of facilities and operations that anchor short-term interest rates at or near the OCR. We have 2 monetary policy implementation objectives:

  • Ensuring that short-term market interest rates trade at or near the OCR
  • Managing settlement cash in the banking system to facilitate payments and settlement flows.

This Bulletin also discusses:

  • the evolution of our monetary policy implementation framework
  • features of different monetary policy implementation frameworks
  • steps we have taken in recent years to improve the implementation of monetary policy
  • the outlook for liquidity operations.

Read the Bulletin

How the Reserve Bank implements monetary policy (PDF, 1.2 MB)

Related information

Domestic markets

Latest OCR decision

Media contact

James Weir
Senior Advisor, External Stakeholders
Phone: 021 103 1622
Email: [email protected]