Advisory: Reserve Bank to publish projections for Official Cash Rate
The Reserve Bank has historically published projections for the 90-day bank bill rate in its quarterly Monetary Policy Statements. From the November Statement, interest rate projections will instead be for the Official Cash Rate (OCR). The projections will continue to be on a smoothed quarterly average basis.
Historically the 90-day bank bill rate has provided a good gauge for the stance of monetary policy because it typically moves in a consistent manner with the OCR. Variations in the past have generally been temporary and experienced during periods of financial stress. More recently, regulatory changes in global financial markets have also been altering the relationship between the 90-day bank bill and OCR, complicating the Bank’s communication of the monetary policy outlook.
The Bank views publishing a projection for the OCR as a more transparent way of presenting the expected policy actions needed to achieve its inflation target. It has no bearing on the way that the Bank conducts monetary policy. The publication of OCR projections as opposed to 90-day bank bill rate projections also brings the Bank into line with the practice of other central banks that publish expected policy paths.
As with previous 90-day rate forecasts, projections for the OCR are conditional on the Bank’s assessment of current economic conditions and assumptions about the future evolution of the New Zealand economy.
Figure: August Statement interest rate projections
Source: RBNZ estimates.
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