At the most basic level, the Reserve Bank has the duty of making sure that people can buy and sell goods and services using money, instead of having to barter. Part of this involves providing currency. Cash is physically issued to the public by banks, but they in turn buy their cash from the Reserve Bank. In addition, banks hold accounts with the Reserve Bank that they use to make payments to each other, on behalf of their customers. Maintaining Price Stability - The Primary Role As the agency that issues money, the Reserve Bank has to make sure that money retains its buying power, that is, the bank guards against inflation or deflation.
Price stability protects the value of people's incomes and savings, and encourages investment.
In addition, monetary policy aimed at price stability also promotes secure employment by smoothing out boom-bust business cycles. On the other hand, the Bank tightens conditions when the economy risks getting 'over-heated'. The prices of items in these categories are regularly surveyed by Statistics NZ and the CPI is published every 3 months. This is one of the main jobs of its Economics Department staff. Monetary policy is forward looking, so each quarter the Reserve Bank projects the outlook for inflation for up to 3 years ahead.