economic costs – either side of that central estimate? put more bluntly, they ask : what could go wrong? they then frame their policy setting accordingly, seeking to have a high probability of avoiding the most costly outcomes. that is, they too practise a form of risk management. this will mean that the setting of policy is altered on the basis of a shifting assessment of the balance of risks. this might be associated with a significant change in the central forecast, but need not be and often is not. on such occasions, those looking for a'justification'for the policy move in a shift in the central forecast itself might not find it. there can, equally, be other periods in which the forecast is signalling that some action is likely to be required in due course, but not necessarily immediately, and where policy - makers believe that there is uncertainty about the outlook or about the effect of policy on the economy. they might perceive some benefit in waiting a little while for further information before acting, judging that, even if that turned out to be an error, it would not be a costly one. the assessment of risks is, however, inherently judgemental : there is no data series called'balance of risks'that can be looked up, no econometric model to produce an answer. so not everyone will reach the same assessment of the balance of risks at any given time, and it would not be uncommon for a significant proportion of observers to be unable to pick the exact timing at which policy, in its efforts to manage risks, might be adjusted. indeed, if policy is about right most of the time, incremental adjustments are highly likely to be'on balance'decisions. there may therefore be plenty of people disagreeing with the decision on the day. that said, the rba has not in recent years been, by international standards, what one could call an activist central bank. the evidence is that the rba has actually been rather less likely than most of its international counterparts to move rates in any given month, having made an average of just over two rate changes per year over the past decade. the range within which the cash rate has moved has also been narrower than those of most comparable central banks. 4 alert readers will notice that the bank of japan is not included above. the reason for that is that the zero lower bound for interest rates was a binding constraint in japan – hence there was a long period of unchanged rates. had it been feasible to lower rates

glenn stevens : the conduct of monetary policy address by mr glenn stevens, deputy governor of the reserve bank of australia, at a luncheon cohosted by the anika foundation 1 and australian business economists, sydney, 13 july 2006. * * * i am pleased to see so many of our colleagues from the financial sector here at the first public function held by the anika foundation. adolescent depression and suicide are a major problem. by supporting research, the anika foundation can make a major contribution to effective treatment of this disease, and thereby make a difference in the lives of our children. so on behalf of the board of the foundation, i thank all of you for coming along. thank you also to citigroup for generously donating the venue, and to the australian business economists for their invaluable support. i want also to pay tribute to adrian blundell - wignall and his family, for their courage and generosity in conceiving and establishing the anika foundation. all of us who know them, or who ever met anika, can only admire the way in which her memory is honoured by this endeavour. adrian, jane, tate and danae, we salute you for turning your own tragedy into such a fine idea ; we want to help you realise it. that depressive illness should be such a widespread problem in a period of such apparent affluence reminds us, of course, that there is much more to life than the mere material. those of us paid to work at maximising the material circumstances of our citizens through the conduct of economic policies trust, nonetheless, that prudent behaviour on our part can make a difference, and in some way help to provide the resources needed for those, ultimately more valuable, non - material pursuits. my topic is the conduct of monetary policy. it will be less a commentary on current economic conditions and prospects than an exposition of the decision process and principles that have guided our actions over recent years. of course i can only give my own perspective, and other members of the board, past and present, might put it a little differently. nonetheless, i hope my remarks may help observers better to understand our decisions – even if they cannot always predict them. process i begin with some discussion of process. for the most part, it is not much changed from the way i described it in detail in a speech about five years ago. 2 the monthly board meeting cycle begins with staff analysis of statistical and liaison information. a