to zero as possible. is the central bank outputsmoothing, or focused exclusively on maintaining price stability? it may be very difficult to tell unless the central bank explains itself, and i would argue the two approaches are often very similar. even where inflation has been pushed away from target, it will often be difficult to tell the difference between the actions of a central bank with a single mandate and the actions of a central bank with a dual mandate. yes, in theory there may be a difference, but in practice that difference may be very small or irrelevant. we saw that in 1996, when inflation in new zealand was slightly above the thentarget of 0 to 2 per cent. we chose to move back to the target over a number of quarters rather than more quickly, partly because we did in fact make the judgement that the economic costs of moving back to the target very quickly would have been unjustified, but also because we recognised that to have achieved a very early return to target would have required a drastic tightening of policy, with the severe risk that further down the track the inflation rate would have gone below the bottom of the target. personally, i am very comfortable with our single mandate, especially in the new zealand context where we have had a long history of believing that monetary policy can do a whole range of things which we now realise have very little to do with monetary policy. the end of history? is inflation targeting " the end of history " from a monetary policy point of view? certainly, i believe it has a huge amount to commend it, and the arguments against its adoption seem, in most situations, to be rather weak. but there remain a number of important unresolved issues, in inflation targeting as in other approaches to monetary policy. how best should central banks communicate the conditionality of their inflation forecasts, while still conveying useful information? why do movements in the exchange rate now seem to be having such small effects on inflation - does this reflect something about the nature of inflation targeting, or perhaps just some peculiarity of the most recent economic cycle? to what extent can central banks make sufficiently reliable estimates of the output gap, and to what extent do changes in the output gap now affect the inflation rate? and perhaps the most troubling question for us all, inflation targeters and others : is there more to achieving monetary stability than calibrating the central bank's interest rate to keep the prices of goods and services purchased by the household sector stable

the knowledge and experience of members individually and as a collective. the government will formalise a monetary policy committee ( mpc ) in the act, and add members from outside the bank, ‘ externals ’, onto the committee. the act will allow the mpc to have between five and seven members, but there will be seven initially, and there will always be more internal than external members. all members will be nominated by the reserve bank board, and appointed by the minister of finance. there will also be a nonvoting observer from the new zealand treasury. figure 2 illustrates the structure of the committee to be established in the act. 22 dincer and eichengreen ( 2014 ) found that new zealand was one of the most transparent central banks in the world ( third behind sweden and the czech republic in 2014 ), although by their estimates we rank much lower on central bank independence. the authors base the transparency indices on public reports and communications by each central bank, and the independence indices on central bank law in each country. 23 see ford, kendall and richardson ( 2015 ) for more on the evaluation of monetary policy. ref # 7482042 v2. 2 figure 2 : monetary policy committee to be established in the reserve bank of new zealand act source : https : / / beehive. govt. nz / release / new - pta - requires - reserve - bank - consider - employmentalongside - price - stability - mandate the mpc and minister of finance will agree a charter setting out the approach to issues defined in the act, including the approach to communications. details of the first charter are yet to be determined, but the minister intends for the mpc to aim to reach decisions by consensus, and for non - attributed votes to be published where there is not consensus. the minister also intends for non - attributed records of meetings to be published that reflect any differences of view among the mpc. we will no doubt explain these and other changes – and their potential implications for the setting and communicating of policy – as they are finalised. of course, the creation of a formal ( or indeed informal ) committee does not guarantee superior outcomes. how the mpc will operate in practice is also extremely important. committees are more successful when they have processes in place that aim to minimise various human biases, such as the pressure to conform, confirmation bias, and a tendency to rely on the most recent events to a greater extent than is sometimes warranted. 24 the