Michael Pascoe: Interest rates won’t work like they used to

When a supply shock increases inflation too much, lifting interest rates can just make it worse, writes Michael Pascoe. Photo: TND

The Reserve Bank – and those of us who watch the bank for a living – tend to enjoy a good graph. Governor Philip Lowe flashed a couple of rippers on Tuesday night.

They were illustrations along the way to a bigger story about how inflation is going to be a wilder ride in the years ahead, with the implication that raising and cutting interest rates won’t be much of a tool for taming it.