News

Rising dollar and low inflation remain the focus for RBA

In a briefing for the less economically cultivated board members, the RBA's research department argued 3.5 per cent would be around the mark to keep the economy growing at its potential, while keeping inflation in check.

It didn't matter that was a conceptual position for way down the track — after inflation has crawled off the mat, wages have picked up and the economy is robust again — the market brought forward its bet on rate hike, the dollar spiked and equities swooned.

RBA deputy governor Guy Debelle was dispatched to give everyone the same lesson on the theory of "neutral rates" the non-economist board members received at their last meeting.

It calmed things down, or perhaps sent traders to sleep. Either way it worked, at least on Friday.