The RBA cash rate decision on Tuesday, while a welcome relief to many and in line with expectations, was a bit of a head-scratcher. There was a gap in logic between the decision and the explanation.

The board statement said that “these factors give the board more confidence that inflation is moving sustainably towards the midpoint of the 2-3 per cent target range”. But the forecasts for inflation in the accompanying Statement on Monetary Policy (SMP) were revised up and are for underlying inflation to flatline above the midpoint. These things appear contradictory.