16 December 2002
NEWS RELEASE
Time Immediate
December 2002 Reserve Bank Bulletin
The Reserve Bank today released the December 2002 issue of the Reserve Bank of New Zealand Bulletin.
The December issue contains three articles on a range of topics reflecting the Reserve Bank's responsibilities.
The first article looks at the Reserve Bank's economic forecasts. The Bank recently reviewed its forecasting performance
and this article summarises the results. The article focuses particularly on the Bank's CPI inflation forecasting
performance, but also examines forecasts of other key macroeconomic variables, given their relevance for the Bank's CPI
forecasts.
The second article deals with the Bank's approach to the management of foreign exchange reserves. New Zealand holds
foreign reserves primarily to enable the Reserve Bank to intervene in the New Zealand currency market if serious
liquidity problems occur. The article reviews the reasons why reserves are held and the risks involved. The article also
discusses the Bank's 'active management' approach to holding foreign reserves.
The third article continues a series on external and macro-financial stability issues. This article looks at the balance
of payments data for New Zealand, particularly in relation to capital transactions, the way balance of payments data are
compiled and the difficulties inherent in interpreting trends in the balance of payments. An important conclusion of the
article is the need for caution when interpreting balance of payments data, particularly in assessing a country's
macro-financial stability.
The December 2002 issue of the Bulletin also contains the text of a speech given recently by the Governor of the Bank,
Dr Alan Bollard, entitled "The evolution of monetary policy in New Zealand". This provides a useful insight into Dr
Bollard's interpretation of the new Policy Targets Agreement and how he sees this influencing the Reserve Bank's
approach to monetary policy.
ENDS