Official Cash Rate to remain restrictive at 5.50 percent

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Forecasting at the Reserve Bank of New Zealand

Aaron Drew, Mike Frith

Forecasting plays a central role in the formulation of monetary policy that is focused on maintaining price stability. To produce a forecast it is important to understand the short-run, cyclical and long run influences on the economy. This article discusses how the Bank’s Forecasting and Policy System has been designed to reflect these influences and how this system is put to use in order to produce a projection. Both how and why the Bank communicates its projections to the market is also discussed.