At the same time, however, it's no longer possible to summarise the stance of policy by reference to the cash rate target alone. Other elements of the policy package have to be taken into account. These other elements affect the transmission mechanism in various ways. Today I'm going to discuss these channels and how they work.
This will also clarify how we can assess the stance of monetary policy. I find it helpful to split our policy tools into two broad groups as follows: First, there are interest rate tools, which are primarily focused on achieving a particular interest rate, such as the cash rate target, forward guidance and the bond yield target.