Karen Silk: Transmission of monetary policy to financial conditions

Speech by Ms Karen Silk, Assistant Governor and General Manager for Economics, Financial Markets and Banking of the Reserve Bank of New Zealand, at the Citi Australia and New Zealand Investment Conference, Sydney, 16 October 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
22 October 2024
by Karen Silk
PDF full text
(939kb)
  |  12 pages

Introduction

E ngā mana, e ngā reo. E ngā karanga maha o te wā.
Tēnā koutou, tēnā koutou, tēnā koutou katoa.

Good morning. I would like to start by thanking Citi for hosting today's event and inviting me to speak. As a member of the Monetary Policy Committee, with my colleagues, I spend a fair amount of time considering the effectiveness of monetary policy transmission through wholesale markets and banking channels as we seek to influence economic outcomes and inflation. It is this area that I'm going to address today.

The transmission of policy rate changes to inflation is a gradual process. It's surrounded by uncertainty and impacted by the prevailing economic and financial conditions. It requires ongoing monitoring, and the Monetary Policy Committee (MPC) meets regularly to assess the extent to, and speed at, which the current stance is influencing the financial system and the economy. Should data indicate that conditions are evolving differently to those expected, or if we judge that the balance of risks to the inflation outlook have changed, then we are able to adjust our approach to reflect this.

Today I will discuss:

  • our assessment of the level of restrictiveness of monetary policy settings through the post-COVID period,
  • factors that have influenced the transmission to tighter financial conditions, and
  • how these may influence the transmission to financial conditions in the period ahead.