And, importantly, the Reserve Bank retains a wide-ranging capacity to respond to financial distress or bank failure where a bank’s financial condition poses a serious threat to the stability of the banking system. As with the former supervision arrangements, the objective underlying the above responsibilities is the promotion of a sound and efficient financial system.
Second, although a high degree of transparency and effective communication are essential ingredients for a successful monetary policy – in order to anchor inflation expectations, reduce uncertainty and thus enhance policy effectiveness – they are not sufficient. A central bank must continuously demonstrate its commitment to, and ability to achieve, its price stability objective by the systematic implementation of its policies.