When commenting on the direction of monetary policy, one must distinguish between the positive and the normative. Because what the RBA will do and what it should do are not always the same thing. Any market participant who traded on the basis of optimal monetary policy will have lost a fortune over the past decade.
These are people we’re talking about. The bank, represented on the board by the governor and deputy governor, seeks to preserve its own survival. The six external board members are subject to their own idiosyncratic incentives. And the ninth and final board member literally answers to the treasurer.
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Steven Hamilton is assistant professor of economics at George Washington University and visiting fellow at the Tax and Transfer Policy Institute at the ANU.
