A positive correlation between the inflation rate and the RBA's target cash rate decision suggests that when inflation is on the increase, the RBA generally increases its targeted cash rate.

Question

Quizplus · Accepted Answer

This is because the RBA aims to keep inflation within a target range of 2-3% over the medium term, and one tool it uses to achieve this is adjusting the cash rate. When inflation is rising above the target range, the RBA may decide to increase the cash rate to help slow down spending and reduce inflationary pressures.

A Positive Correlation Between the Inflation Rate and the RBA's