Monetary policy   Goals of monetary policy   RBA Charter   Role of underlying inflation   Implementing monetary policy   Tightening of MP   Loosening of MP   How other rates change   Pre-emptive decisions   'Open mouth operations' Exchange rate intervention  Monetary policy stance   Expansionary policy  Monetary policy neutrality    Restrictive MP   Transmission mechanisms   MP and economic goals   low inflation Growth/jobs  MP strengths and weaknesses

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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Goals of monetary policy

Like all policies, the ultimate goal of monetary policy is to increase the welfare and prosperity for all Australians.  However, monetary policy has a clearly defined medium term objective to achieve low inflation, which the RBA defines as consumer price inflation between 2 and 3 per cent, on average, over time.  Once low inflation is achieved, the RBA can then focus on policy decisions that assist in the attainment of other economic goals, in particular, full employment and economic growth, so long as these measures pose no threat to low inflation.  

The key monetary policy considerations for the RBA Board can be summarised as follows:

In this respect, monetary policy is the key macroeconomic policy that is designed to achieve stability in the level of domestic economic activity (i.e. internal stability), where it will generally be used in a counter-cyclical way to boost activity when inflation and growth are low and restrain activity when inflation and growth are high.

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The role and functions of RBA

The monetary policy framework