Inflation

Brian Fallow suggests Reserve Bak Governor should be at risk of losing his job, as inflation is projected to stay above 3% (in fact reach 4%) until September 2007.

This will have put it outside the target zone of 0% to 3% for around three years.

It is easy to overlook the significant difference between an inflation rate which is at the top of or exceeds the inflation target range, and inflation at 1% (which is what we used to target).

Over six years, inflation at a 1% average means prices would go up 6.2% over six years.

In reality inflation over the last six (and 1/4) years has been 17.7%. And that is not just petrol as food prices have gone up 16.0%.

If one takes into accounts the projections for the next two years, inflation over an eight year period looks to be 26.1%, while at 1% annually it would be 8.3% over eight years.