Given the relationship between expectations formation and the yield curve described above, the central bank should seek to improve transparency by carefully explaining its assessment of the state of the economy and financial developments, and ensuring that the formation of the yield curve will be consistent with its thinking regarding the conduct of monetary policy by laying out the latter clearly.
The Reserve Bank decided to supply more than the usual $ million of exchange settlement funds, so that the overnight interest rate would not rise above the target set by the Board in early August. Those operations were successful in maintaining the cash rate at the 6.5 per cent target, though other short-term market interest rates remained unusually elevated.