Monetary Policy and Recent Economic Developments February 2015 Teacher and Student Guide.

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Presentation transcript:

Monetary Policy and Recent Economic Developments February 2015 Teacher and Student Guide

Reserve Bank of Australia Responsible for: Monetary policy and market operations Payments system stability & efficiency Financial system stability Issuing Australia’s currency notes Banker to the government Managing foreign exchange reserves The objectives specified in the Reserve Bank Act (1959) are: Stability of the currency Maintenance of full employment Economic prosperity and welfare of the people of Australia

Reserve Bank Board Responsible for monetary and banking policy Nine members: Governor, Deputy Governor, Secretary to the Treasury, and six external members Meets first Tuesday, except January

How the RBA achieves its objectives Inflation targeting regime since 1993, agreed with the government since 1996, and which was most recently updated in 2013 Objective is to keep annual inflation between 2 and 3 per cent, on average, over the cycle CPI inflation is the target, but underlying measures – which abstract from temporary large price increases and decreases – help show future trends in ‘headline’ inflation RBA sets the policy interest rate (termed the cash rate – the rate banks charge each other for overnight funds) The RBA uses liquidity operations (altering the supply of overnight funds) to ensure the cash rate remains at target Changes in the cash rate affect private mortgage and other lending and deposit rates that, along with any exchange rate response, affect the amount of private consumption and investment spending Inflation will remain steady and low when total spending is kept close to the level of potential output over time

For more information Visit the Reserve Bank website: Chart Pack (updated monthly) Chart Pack Education Statistics