“I mean, it’s whatever works at the time, and it keeps changing.”He is talking about the traditional role of central banks in keeping inflation low by hiking interest rates. Traditionally we have seen inflation and interest rates as intrinsically linked; lower interest rates mean more borrowing, higher demand and therefore higher inflation. After the Global Financial Crisis, central banks started cutting interest rates, sometimes into negative territory, to reinflate their economies. Then there’s the other type of inflation many people would like the Reserve Bank to help out with: holding down asset price inflation on houses and other assets. SUPPLIED David McLeish says inflation is coming through a supply-side shock, which makes it hard for a central bank to tame.

Source: Stuff November 23, 2021 23:43 UTC