over the medium - term and how monetary policy might respond to a changing economic landscape. in this regard, around twenty years ago, the reserve bank became a pioneer in another way. when publishing our interest rate decisions, we also began to publish a forward ( and endogenous ) projection of interest rates in the future. we use this to capture the overall stance of monetary policy. one of the specific tools we use are surveys of staff and mpc opinions on the balance of risks in the forecasts. this indicates both collective opinion, and quantifies the results. this greatly enhances the productivity of the mpc, as they don ’ t have to spend time discussing everything if they are already in agreement, and those who disagree with the majority can speak up and explain their position. 13 we don ’ t attribute the views to particular members. this can add noise to the summary, with the attribution distracting readers from appreciating the substance of the material. 14 chapter seven of the handbook describes the reserve bank ’ s approach to monetary policy strategy. ref # 8058027 v1. 4 this tool remains integral to how the mpc sets monetary policy and understands the potential trade - offs with a dual mandate. the first monetary policy decision of the new mpc occurred last month, in may. our starting point was a new zealand economy where the labour market was operating near maximum sustainable employment, and annual core inflation pressures were within our 1 to 3 percent target range but below the 2 percent mid - point. we discussed the slowdown in global growth, and how this might affect new zealand. we also addressed the recent loss of domestic economy momentum since mid - 2018, through both tempered household spending and restrained business investment. in order to continue achieving our policy objectives, we agreed that additional monetary stimulus was needed to help bring inflation back to the 2 percent mid - point and support maximum sustainable employment. we then turned to the question of the magnitude of stimulus we wanted to adopt ( the stance ) and the timing and means by which we would try to deliver this ( the tactics ). figures 4 – 6 show how different ocr paths could have been used to achieve our objectives. while each path was consistent with meeting our objectives, they each offered different tradeoffs. 15 figure 4 : official cash rate ( ocr ) paths to achieve alternative monetary policy stances % % baseline lower ocr higher ocr svensson ( 2014 ) suggests that central banks should take a balanced approach to

our governance framework for monetary policy. 5 inflation data : nz : consumer price index ( cpi ) excl. food & energy ; uk : cpi excl. food & energy ; aus : trimmed mean cpi ; usa : personal consumption expenditure ( pce ) excl. food & energy. 6 grimes, oxley, and tarrant ( 2012 ). ref # 8058027 v1. 4 in pursuit of greater transparency, we have also published these principles and processes in a comprehensive monetary policy handbook ( the handbook ). 7 this is an essential document, for everyone from school students to mpc members. importantly, it is also a living document that will evolve as our understanding evolves. principles the first part of the handbook i would like to cover is the section on mpc deliberation principles. 8 figure 2 : mpc deliberation principles principle clear objectives diversity process implications each meeting has a defined purpose an agenda. inclusive of different intellectual and personal styles. information and deliberation meetings are expert - led. inclusion of information initial focus on understanding and discussing information ; decision meetings clearly separated from information and deliberation meetings. decision meetings chaired by governor. inclusion of people deliberation meetings allocated enough time for discussion. clear avenues provided for expressing minority views. there are three principles which guide the deliberations within the mpc. i ’ ve talked already about providing clarity around our objectives — the equal weighting of our employment and inflation goals. this is the first of our three principles. the second, is diversity — diversity in the skills, experiences, thoughts, and personal characteristics of the mpc members. the third, is inclusion — inclusion of information and people, ensuring decisions are made on the basis of all the available insights, and reflecting the views of all of the committee members. why are diversity and inclusion so important? the governance literature shows that diversity and inclusion improves the pool of committee knowledge, insures against extreme views, and reduces groupthink. 9 these principles drive the committee towards an unbiased policy decision — the best that is possible given existing information. think about this from a practical perspective. modern monetary policy is confronted by diverse issues such as climate, technological, and other structural and social changes. a sole decision 7 the handbook explains everything the public needs to know about making a monetary policy decision, and is available at : https : / / www. rbnz. govt. nz / monetary - policy / about - monetarypolicy /