The Bank of Canada recently completed a formal review of its inflation management framework. It looked at whether a higher inflation target should be achieved. It concluded that the problem of low inflation is relatively rare in economic history, while the cost of higher inflation persists, while it may be more difficult to stabilize inflation at higher rates.  Phase 2 of the audit is verified at the final level. It will focus on the role of the reserve bank in the area of financial stability and on more comprehensive governance reform. Announcements on the final scope will be made by mid-2018 and subsequent political work will begin in the second half of 2018. “The importance of monetary policy as an instrument to support the real and productive economy has evolved and will be recognized in New Zealand law by adding the results of employment policy as a dual mandate of the Reserve Bank, in addition to price stability, as can be seen in countries such as the United States, Australia and Norway.  Bank of Canada, “Renewal of the inflation-control target – Background information” (October 2016) at 3 a.m. During these changes, inflation was the primary objective of the PTA, as was the case with the Reserve Bank of New Zealand Act (1989). But it was not the only variable of economic interest. Employment and output variability – key indicators of the real economy – was taken into account when defining monetary policy. The final ATP, signed in 2018, added an additional political objective: that the reserve bank contribute to the promotion of maximum sustainable employment.
This should be pursued in parallel with the inflation target and served as the basis for the first mission. 18. Given the role of reserves in the ATP, the Bank began to calculate an inflation index known as “subliminal inflation” to adjust the effects of interest rates, housing costs and one-off price shocks. The underlying measure of inflation was published by the Bank each time Statistics New Zealand`s quarterly CPI was published, and the Bank based its monetary policy decisions on changes in the underlying inflation level and not on the so-called pivotal rate. In the early 1990s, for example, adjustments were made to the consumer price index to avoid the effects of changes in interest rates and the effects of changes in public levies. The Bank has shown that it does not take into account the direct impact of these one-off influences on the consumer price index and instead focuses monetary policy on medium-term inflation, i.e. the underlying inflation rate. However, as it became increasingly clear in subsequent years, the calculation of underlying inflation posed difficulties in determining inflows or exclusions from positions.