This, however, misses the very important point that the Reserve Bank takes account of the changing relativities between the cash rate and other interest rates when setting the cash rate. Other things equal, if interest rates in the economy are rising relative to the cash rate, there is less need for the cash rate to rise.
Interest rates were increasingly given more importance because of their superiority in signaling of monetary policy stance, yet within the framework of monetary and reserve money program. Transparency was increased by issuing six-monthly statements on monetary policy. Candid analytical reviews in SBP Annual and Quarterly Reports, not only on the real economy, but SBP’s own monetary policy also added to increased transparency.