Broadly speaking, monetary policy actions in one country spill over to other economies through three main channels: changes in exchange rates; changes in domestic demand, which alter the economy’s imports; and changes in domestic financial conditions—such as interest rates and asset prices—that, through portfolio balance and other channels, affect financial conditions abroad.
The Reserve Bank rose for a similar purpose back in 1934, to enable New Zealanders to better grow the New Zealand economy independent of foreign banks’ and economies’ credit cycles – particularly Britain and Australia. You will hear a lot more of this in coming weeks. Why? First, storytelling is fun and helps people connect to their daily tasks at the Bank.