What challenges is the Central Bank facing in executing its monetary policy agenda?
This provides a reasonably solid anchor for monetary policy which can deliver low inflation over the medium term: it has served us quite well in that annual headline inflation has averaged only just over 6% during the 2000s. The drawback with using broad money, or any quantitative monetary aggregate, as an intermediate target for monetary policy is that it requires stable money demand. If money demand is not stable, interest rates may be more volatile than is desirable. In the short run we are addressing this problem by revising our monetary policy operating procedures, in two ways. First, we review the monetary programme, including the broad money target, every month, using the latest available macroeconomic and financial data, to evaluate whether any changes to the monetary targets are warranted. Changes to the monetary targets might be warranted if there is a shift in money demand. Secondly, we are intervening much more pro-actively in the money market, often on a daily basis with r
