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What Is a Monetary Policy Statement?

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  • Written By: K.C. Bruning
  • Edited By: John Allen
  • Last Modified Date: 21 November 2016
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A monetary policy statement is a document distributed by a bank which outlines the state of the economy and the organization from several different perspectives. It is usually arranged in several numbered sections which cover issues such as market changes, trends, and the effects of any significant events that took place over the previous period. An updated version of the document is usually distributed quarterly. It is both a resource for investors and a demonstration of how the bank functions within the economic climate.

Typically a monetary policy statement will start with some kind of an overview or introduction. This describes a big picture view of the current economy, including the strength of the local currency and any positive and negative trends. It will also usually discuss current risks and benefits possible in the current environment.

The length and format of a monetary policy statement can vary, depending primarily on the size of the bank and the complexity of its operations. After the overview or introduction, some of the categories found in a typical statement include information about domestic and international financial conditions and an overall economic outlook for the next year or two. Other potential sections include statements about particularly strong trends, changes in wages or prices, and the macroeconomic forecast.

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A monetary policy statement will also often outline how the bank is managing both the external changes outlined and internal issues. It may include information about how it has been managing itself in relation to the monetary policy and what its progress is towards its goals. A typical statement will also include the bank’s strategy for the next several years. This information will usually show how the bank manages itself in reaction to current economic activity.

Often a monetary policy statement will also describe recent developments in the financial markets. It will usually include both domestic and international information and perhaps compare the two. This information can be used to gauge the current state of the market and as a tool for making forecasts.

If there has been a major event that has affected the economy over the past period, then the impact may be described in the monetary policy statement. This can include natural disasters such as earthquakes and tsunamis. It may also involve events such as war and terrorist attacks. Depending on the size of the report, this information may not have its own section.

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