At last I like your formulation. “[T]emporary non-accelerating inflation rate of, say, 3.5 to 4%”.

This is very different to the previous formulation which suggests to the suspicious that you are invoking some old Phillips curve idea that there’s a clear tradeoff. I agree that if we have cost push coming through in a bunch of areas – which we do – that it might well be the case that the most growth promoting way to accommodate it is to allow prices to grow by around 4% temporarily. But then again that’s pretty much where we are now, and we need to get the rate back down to the band – don’t we? If you say ‘no’ then ‘temporary’ is really permanent.

How do you ro anyone know if monetary policy is too tight or loose for that matter? What’s the reference point? I don’t see we have one. The only reference point we have is actually watching economic conditions which is a look back function.

It seems to me the RBA is doing the “much too much, much too late” thing again with monetary policy. It should certainly have been running a tighter policy as soon as it became evident we were in a strong and sustained commodity boom, and now it is overcorrecting. This could easily set off a decade or so of boom and bust cycles.