Pushing up interest rates isn’t something the Reserve Bank does lightly.
But what’s worrying the Reserve Bank – and why it increased interest rates for a record seventh consecutive month on Melbourne Cup Tuesday – is that inflation seems to have become completely detached from the bank’s target band.
That target band of 2-3% was introduced in the early 1990s, at a time when that’s where inflation was. With one brief exception during the introduction of the goods and services tax, at the start of the 2000s, inflation has never since been far away from the band – until now.
