He emphasised the current approach – which has seen inflation come in almost dead in the centre of the 2 to 3 per cent range over the past 20 years – allows considerable leeway for inflation to fall outside the range for periods of time.
One of the biggest reasons for not lowering the target range would be that such a move would entrench lower inflation expectations – a risky proposition when official interest rates are already only 1.75 per cent above zero.
It’s been one of those semi-permanent frustrations of Australian monetary policy in recent years that every time the RBA opened its mouth the dollar took off. Yesterday Captain Glenn Stevens finally broke this pattern by whacking the dollar lower, from the AFR:
