The individual votes made by members of the Reserve Bank's monetary policy committee at meetings to decide the official cash rate will be made public, in an effort to boost transparency and accountability.
The OCR is reviewed by the Reserve Bank’s monetary policy committee eight (up from seven) times per year, with the goal of keeping inflation within a target range of 1% and 3%.
It sets the cost, or wholesale interest rate, of which banks or other financial institutions borrow money from each other or the Reserve Bank.
This directly affects interest rates felt by borrowers across the country. When the OCR increases, so does mortgage and savings rates, making borrowing more expensive. When it decreases, so does the interest on borrowing money, meaning taking a loan generally becomes cheaper.
The OCR is currently set at 2.25%, and has its next review on May 27.
Reserve Bank governor Dr Anna Breman said the agreement to update the committee's charter is part of a wider effort to increase transparency, a goal she had signalled since her appointment was announced in September last year.
Other efforts included holding press conferences at Monetary Policy Reviews, moving to eight monetary policy meetings per year, and increased public outreach and external communications, she added.
Breman said the new charter will also make it easier for committee members to communicate their individual views and would “bring us in line with some of the most transparent central banks in the world".
The new charter also makes it clear members of the committee are encouraged to communicate their views externally, but ensure equal access to information be retained.
“Monetary policy transparency is important as it ensures that central banks remain accountable to the public and credible in their decisions. The changes to the Charter further enhance the transparency of monetary policy decision-making at the Reserve Bank of New Zealand,” Breman said.
Finance Minister Nicola Willis said the committee would also begin attributing material differences in views in its records of meetings.
“Alongside the independent review of New Zealand’s monetary policy response to the Covid-19 pandemic, these changes will strengthen transparency, support accountability, and help build public understanding of the MPC’s decision making,” Willis said.
The committee would review the charter in 12 months' time to ensure the changes are having a positive impact on understanding of the decision making process and overall monetary policy transmission.
The charter would also be in effect for the next OCR decision and monetary policy statement, which is scheduled for May 27.
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