Monetary policy

The Reserve Bank uses monetary policy to maintain price stability as defined in the Policy Targets Agreement (PTA). The current PTA requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.

The Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly. Each Monetary Policy Statement must set out:

  • how the Reserve Bank proposes to achieve its targets;
  • how it proposes to formulate and implement monetary policy during the next five years; and
  • how monetary policy has been implemented since the last Monetary Policy Statement.
The Reserve Bank uses monetary policy to control inflation and keep it within a specific target band. Find out about how the Reserve Bank uses and implements monetary policy to maintain price stability.
The Reserve Bank Act requires that price stability be defined in a specific and public contract, negotiated between the government and the Reserve Bank. This is called the Policy Targets Agreement (PTA). The current PTA, signed in September 2012, defines price stability as annual increases in the Consumers Price Index (CPI) of between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint.

Inflation is the term used to describe a rise of average prices through the economy. It means that money is losing its value. This section provides a variety of resources that explain inflation and deflation. This connects to how the Reserve Bank uses monetary policy to maintain price stability.

The Reserve Bank uses monetary policy to maintain price stability as defined in the Policy Targets Agreement (PTA). The current PTA requires the Bank to keep inflation between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.