As a layman, I don't have any schooling re things like "keeping inflation within a 2% to 3% band" – but I often wonder about decisions the RBA makes in this regard.
Now, I know that this is not the ONLY parameter that the RBA looks at, otherwise they would have clicked up a quarter percent today – "Headline inflation at 3% and underlying at 2.9%" I think were the numbers.
Was it THIS "band" that had them lifting rates in late 2007 and early 2008 (while the rest of the world were frantically CUTTING theirs – to unheard of low levels)? That led to an over-strong AUD which effectively stopped our economy in its tracks (except for mining….???).
Isn't that a bit like beating someone within an inch of their life, then performing CPR (those HUGE Rate cuts later in 08 and thru 09) so that their victim would recover more quickly???
So, just musing here – what do YOU think of this 2% to 3% band that they endeavour to have our economy settle in?
Does it appear to work for you?
Would we be better served if they "fiddled" less often – perhaps quarterly or even 6 monthly.
Or, is it simply that the "2 – 3% band" is just a bit tight?
Could it be that some situations call for just 1% inflation on occasions for best results – or 4% during some kind of surge….. Why not?
Interested in your thoughts,
Benny
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