(II)  The importance of price stability and an efficient and stable financial system  Price stability and financial stability remain the Reserve Bank’s central objectives for monetary policy and prudential policy. These provide the best framework for achieving stronger growth in output and employment in the longer term.
Price stability enables households, businesses, and governments to plan with greater certainty; it facilitates long term contracting; lowers the inflation risk premia embedded in interest rates; and enables producers, consumers, and investors to respond to opportunities created by changing relative prices rather than diverting resources to hedge against inflation.