Monetary policy

Objectives of Monetary Policy In Australia, monetary policy involves influencing interest rates to affect aggregate demand, employment and inflation in the economy.1 It is one of the main economic policies used to stabilise business cycles. The Reserve Bank is responsible for monetary policy in Australia, and it sets a target for the nation's official interest rate, which is referred to as the ‘cash rate’. The cash rate is the conventional tool of monetary policy in Australia. Monetary policy has, at times, also included other tools, such as forward guidance, the provision of term funding to the banking system, a yield target, and quantity targets for the purchase of government bonds.