When was monetary policy implemented

When aggregate demand in the economy is weak, for example, inflationary pressures are likely to be diminishing and monetary policy can be eased, which will give a short-term stimulus to economic activity. This approach to monetary policy in Australia commenced in the early s. The earliest references to it were contained in speeches by the then Governor in August and March and August The formulation of monetary policy is the primary responsibility of the Reserve Bank Board.

The Board usually meets eleven times each year, on the first Tuesday of the month except in January. Hence, the dates of meetings are well known in advance.

For each meeting, the Bank's staff prepare a detailed account of developments in the Australian and international economies, and in domestic and international financial markets.

The papers contain a recommendation for the policy decision. Senior staff attend the meeting and give presentations. Monetary policy decisions by the Reserve Bank Board are communicated publicly shortly after the conclusion of the meeting.

From day to day, the Bank's Domestic Markets Department has the task of implementing the monetary policy decisions of the Board. The Reserve Bank Board's explanations of its monetary policy decisions are announced in a media release, which is distributed through electronic news services and published on the Reserve Bank's website at 2. Over recent decades, the Reserve Bank has targeted the cash rate, which is the rate charged on overnight loans between commercial banks.

It has a powerful influence on other interest rates and forms the base on which the structure of interest rates in the economy is built. Any change to the cash rate target takes effect from the day following the announcement. In addition to the cash rate, since March the Reserve Bank has also been targeting the yield on the 3-year Australian Government bond to help lower funding costs across the economy. The Bank stands ready to purchase government bonds to help achieve this target.

The Bank purchases government bonds in the secondary market, and does not purchase bonds directly from the government. The Reserve Bank announced in November that it would purchase a nominated amount of bonds issued by the Australian Government as well as by the states and territories further out along the yield curve.

Together with the target on the 3-year Australian Government bond, these bond purchases help to lower the whole structure of interest rates in Australia. Under exceptional circumstances, monetary policy makers adopt additional nonstandard measures to ensure that their interest rate policy is transmitted effectively to the economy. The most important monetary policy tool is controlling money market interest rates.

Via the transmission mechanism, the level of interest rates impacts on aggregate demand and hence on price developments. Macroprudential oversight in the EU.

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