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- Monetary policy is the process by which the Reserve Bank of New Zealand (the Reserve Bank) controls the money supply to ensure price stability in goods and services and confidence in the currency.
- In New Zealand, the functions of the Reserve Bank are set out in the Reserve Bank of New Zealand Act 1989. The Act requires the Reserve Bank Governor to sign a Policy Targets Agreement (PTA) with the authorised Minister (usually the Minister of Finance).
- A new PTA will be signed between the authorised Minister and the next appointed Reserve Bank Governor. The current Governor’s term ends on 26 September 2017. Deputy Governor Grant Spencer has been appointed Acting Governor for a period of six months, given the proximity of the 2017 general election, to enable the recruitment of a new Governor to assume office in March 2018.
- New Zealand has had 11 PTAs to date, with the latest signed in June 2017. The June 2017 PTA renewed the September 2012 PTA, and requires the incoming Acting Governor to keep future annual inflation between 1–3 percent on average, over the medium-term, with a focus on keeping future average inflation near the 2 percent target midpoint.
- The Reserve Bank conducts monetary policy in New Zealand through the tightening or loosening of the Official Cash Rate (OCR). This rate, currently at 1.75 percent, is at its lowest level since it was introduced in March 1999.
Publication Details
Copyright:
NZ Parliamentary Service, 2017
License type:
CC BY
Access Rights Type:
open
Post date:
4 Jul 2017
