Rather than detailed calculations of the impact of specific shocks, as embodied in the old underlying inflation measure, the PTA now explicitly acknowledges that outcomes will occasionally fall outside the target range for a variety of reasons, even when the Bank is “constantly and diligently” striving to deliver price stability.
In those circumstances, the Bank is required to provide a satisfactory rationale for its judgements. Ultimately, the Bank’s non-executive board members must assess the quality of those judgements and report their findings to the Treasurer. Embodied in the shift in emphasis over the past year or two has been the analytical work undertaken in reviewing the past business cycle.