LETTER: Reserve Bank gets it wrong
Rethink criteria on determining interest rates
When inflation is the sole factor driving interest rates, without proper analysis thereof, our Reserve Bank is acting in a myopic way (“Which side is the Bank on: ‘permanent’ or ‘transitory’?”, November 22).
Most price increases are a result of supply-side constraints and price increases (like crude oil). Increasing interest rates has no effect on this pricing. The only impact is to reduce consumption.
The Reserve Bank needs to rethink its criteria on determining interest rates and follow the example of the major economies. Sometimes they seem to be trying to outsmart even themselves.
Stefano Magni, Via BusinessLIVE
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