Element 1 summarises the main institutional features of monetary policy decisions in currency areas represented on the Markets Committee. It summarises which body is responsible for policy decisions, details about its composition, key parts of the mandate, and the nature of the decision making process (eg whether decisions are made by a consensus or determined by a majority of vote). Element 1 further indicates the frequency of policy meetings and public announcements of policy decisions. The last column of the element reports information about the main policy target (oftentimes a particular short-term interest rate, and in some cases, a specific macroeconomic target such as a certain level of inflation).
Monetary policy operating frameworks comprise several components and key features, including an operational target and the tools and procedures used to achieve it. Element 2 provides an overview of key features in each operating framework, followed by more detailed presentations on various components in the following elements.
Communication is an important tool used by central bankers to shape expectations, which can help central banks achieve macroeconomic objectives. Additionally, communication can be viewed as a mechanism to hold independent central banks accountable for their activities. Element 3 summarises the extent of monetary policy communications, including details about: i) the explicit use of forward guidance, ii) the timing and distribution of a policy announcement, iii) the policy announcement and documents, iv) communication explaining policy decisions, v) the dissemination of minutes, vi) content of minutes, vii) publication of forecasts, and viii) publication of projected path of policy rate.
Many central banks impose reserves requirements, which oblige financial institutions to hold a minimum percentage or amount in reserve against specified deposit liabilities as deposits with their central bank. Central banks may use reserve requirements for liquidity management purposes, monetary control and/or to support the functioning of the payments system. The required reserve ratio can vary by the maturity and by the currency of the reservable liabilities. Element 4 summarises the ratios and size of the reserve requirements.
Central banks differ in the ways in which reserve requirements are implemented. Element 5 summarises the main features of reserve requirements: i) the length of the maintenance period (ie period for which reserve requirements are set), ii) the length of the calculation period (ie period for which reservable liabilities are used to calculate required reserves), iii) the lag between the calculation period and its associated maintenance period, iv) whether financial institutions need to fulfil requirements on a daily basis or whether averaging over a maintenance period is allowed, v) whether institutions are allowed to carry over some excess or deficiency of reserves to the following maintenance period, vi) whether institutions are allowed to use vault cash to fulfil reserve requirements, and vii) the remuneration on required reserves (average and marginal rate).
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