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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A pre-emptive approach taken by the RBA

Time lags slowdown the transmission mechanism, forcing the RBA to be forward looking when deliberating on monetary policy settings.  This is because it can take up to two years for the full effects of a change in monetary policy to take place.   Accordingly, changes to the target cash rate are typically 'pre-emptive' in the sense that they act to dampen inflation or inflationary expectations before they actually appear in the economy.  This approach clearly requires the RBA to use a variety of economic statistics, such as current and forecast rates for economic growth and inflation.  It will pay particular attention to those statistics that are 'leading indicators' of economic activity.  These statistics provide an indication of what is likely to happen to economic growth or inflation in the future.  They include the following:

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