Reserve banks make a big difference in interest rate setting

The Reserve Bank says it no longer looks at inflation expectations to guide monetary policy. Rather, focus here now.

Reserve Bank Governor Philip Row (Image: AAP / Joel Caret)

The Reserve Bank (RBA) has revolutionized monetary policy and has had a major impact on the timing of interest rate fluctuations over the next few years. In effect, banks are turning their backs on the old and established ways of responding to economic events.

For years, central banks, including the RBA, have implemented monetary policy based on suggesting that current data can occur a bit late with respect to charter objectives (inflation and employment in the case of RBA). I did.

Banks and many economists have come to trust inflation expectations as a key indicator. Consumer sentiment research (I have a question about the possibility of future price fluctuations), inflation-indexed bond pricing (such as the TIPS of interest). Treasury Inflation-Linked Securities, US Market) and Corporate Feedback in Regular Surveys.

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