conditions (Peare, 1999)(Reserve Bank of New Zealand, 2002). It should now be obvious that the Reserve Bank and its policy is an ever-evolving creature, constantly adapting itself to fit the current world financial and social situation. By following the history, and thus, the evolution of the modern Reserve Bank, as written above, we can now make some firm statements about the role of the Reserve Bank of New Zealand. The Reserve Bank also currently acts as the last resort lender to the financial market, offering money when it is not available elsewhere. It also acts as the Bank for the Government, providing transaction services, financial advice, and foreign exchanges. It allows New Zealand to trade with foreign countries, allowing for the easy transfer and conversion of money (Peare, 1999)(The Reserve Bank of New Zealand, 2002).The Reserve Bank Act 1989 states that the primary function of the bank is to provide stable price levels. This is achieved by the Policy Targets Agreement, which sets out specific stable price goals. Once the setting of the policy is complete, it is required to be announced publicly, and any future changes must also be made public. The Reserve Bank’s Policy Target Agreement currently has four sections. The first says that so monetary policy can have the greatest positive impact on sustainable economic growth, development, and employment, stability in the level of prices must be maintained. The second requirement is to maintain inflation between 0-3%. The third states that when a one off event causes inflation to rise above 3%, efforts are made to ensure that it does not have a permanent effect that would maintain high inflation. The fourth requirement is that the Reserve Bank is to be accountable for any decisions it makes, and must give explanations for any decision made. It also states that the bank must avoid causing any instability by introduction of any monetary policy (The Reserve Bank of New Zealan...
