How the Reserve Bank implements monetary policy – Reserve Bank of New Zealand – Te Pūtea Matua

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.