Reserve defends inflation focus

Reserve Bank governor Glenn Stevens has hit back at critics who say the strategy of targeting inflation as a means of controlling the economy is short-sighted. While admitting that it is not perfect, Mr Stevens says that that inflation targeting "preserved" the value of the currency while allowing the bank to respond to trends in economic activity. He was responding to people, including former RBA governor Bernie Fraser, who say that the strategy does not allow the central bank to control the economy, and that the 2-3 per cent target range for inflation needs to be higher. "Inflation targeting is not perfect and, on occasion, still leaves policymakers with some quite difficult decisions to make. It is, however, the best system that has been devised as yet," said Mr Stevens.

Source: Sydney Morning Herald