The BOU uses its monetary policy tool – the policy interest rate (Central Bank Rate) – to target core inflation, but our ability to achieve our inflation target does not just depend on setting the policy interest rate at the appropriate level. Public expectations about future inflation and the impact of monetary policy also help to determine future inflation outcomes.
Hence monetary policy must be transparent. The BOU must explain its monetary policy to the public and try to guide inflation expectations through clear indication of its Central bank rate decision, the underlying reasons for that decision and convincing the public that the decision taken shall deliver the publically announced inflation target.