KK6, KK7 - Monetary Policy Stance, Monetary Policy Stance over the last two years

Question 1

Expansionary/Accommodative Stance

Answer 1

Via the 4 transmission mechanisms, RBA actions to establish a lower cash rate target (possibly below 3.5) designed to discourage saving and encourage spending in response to a non-inflationary period of week demand and growth.

Question 2

Contractionary/Restrictive Stance

Answer 2

The transmission mechanisms operating individually following the establishment of an increased target cash rate (perhaps above 3.5%) to reduce consumption and increase the incentive to save, via higher interest rates. This should limit the effects of inflationary boom.

Question 3

Neutral Stance

Answer 3

-Monetary policy setting is unlikely to have contractionary or expansionary effect on AD.
-This may be around suggested 3.5%
-Is the cash rate that prevails when internal stability is achieved

Question 4

Monetary Policy loosening/tightening

Answer 4

-The decision to reduce (loosen) or increase (tighten) the target cash rate in the Overnight Money Market, with subsequent effect on interest rates

Question 5

Monetary Policy stance over the last two years

Answer 5

-4.10% (highest ever in July 2023)
-More contractionary stance (above 3.5%) for 2023
-Is reducing slowly though