What is the relation between Reserve Bank and the Government?

1 ANSWERS

1. Banking Expert
   

   The Reserve Bank Board makes decisions about interest rates independently of the political process that is, it does not accept instruction from the Government of the day on interest rates. This principle of central bank independence in the operation of monetary policy, in pursuit of accepted goals, is the international norm. It prevents manipulation of interest rates for political ends, and keeps monetary policy focused on its long-term goals. With this independence naturally comes a need for consultation and accountability. The relationship of the RBA with the Government is one of independence with consultation, as outlined in Consultation with Government and Accountability to Parliament.

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