ECON1102 Lecture Notes - Lecture 7: Inflation Targeting, Core Inflation, Unemployment
Document Summary
Instruments: monetary policy instrument: variable which the central bank can directly control, eventually has a predictable effect on policy targets, most cbs currently use a (very) short term interest rate as their policy instrument. Inflation target of (2-3%: operating procedures, announces target value for the cash rate then intervenes in cash market to ensure: actual cash rate = target cash rate. 7. 1. 1 inflation targeting: was formally adopted in 1996 and is known as inflation targeting, 2-3% is the target. 7. 2. 1 monetary policy decisions: decisions about the direction of monetary policy are made on a monthly basis (except for. Interest rate in interbank market = cash rate. 7. 2. 3 a channel system: when the rba board announces its target value for the cash rate the rba provides holders of esas with two options for borrowing and lending overnight, called standing facilities, 1st automatic facilities. If the rba buys bonds from the banks it will pay for the bonds by crediting their.
