(July, 2011)
This edition of policy viewpoint will review recent developments in ultimate and operational objectives of monetary policy and the challenge of persistent relative price shocks. The analysis will review the transmission mechanisms of recent relative price shocks and other multiple shocks complicating the conduct of monetary policy. It concludes by assessing the adequacy of conventional monetary policy instruments and the need to utilize non-traditional tools to eliminate structural distortions and increase the effectiveness of traditional monetary policy instruments.