These were somewhat offset by cheaper fuel First, the whole point of having an inflation target is to anchor inflation expectations. The inflation rate is calculated using the price increase of a defined product basket.
However, they are a long way from being unable to do anything: the Fed can reverse the 9 rate hikes seen since December and start quantitative easing again if needed; and both the ECB and Bank of Japan could expand their QE programs.
The problem for RBA credibility? The Australian economy is highly dependent on its mining sector as well as its agricultural sector in order to grow, and it exports the majority of these goods to eastern Asian countries, most prominently China. Inflation surprises on the downside again Australian inflation as measured by the CPI was flat in the March quarter and up just 1.
For example, in the s and more recently in Japan. Deflation refers to persistent and generalised price falls.
This could risk a debt deflation spiral of falling asset prices and falling incomes leading to rising debt burdens, increasing defaults, spurring more falls in asset prices, etc. It left the headline rate at 1.