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Essay text:
Since the early 1990’s, the RBA has set a target for the consumer price index (CPI), of 2-3 per cent per annum. Table 1 shows the consumer price inflation rate from 1989/90 until present. The inflation rate can be seen to fall dramatically in the early 1990’s into the RBA target range and remain there until recently.
Table 1
Source: Reserve Bank of Australia
Monetary policy within the RBA aims to achieve this target CPI over the medium term, whilst encouraging strong and sustainable growth within the economy. Because controlling inflation preserves the value of money, managing inflation is the predominate way in which RBA monetary policy assists in the long-term growth of the economy...
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