It might be helpful for our discussion if I begin by reviewing how things stood at the time of our last meeting, and what has changed in the interim. When the Committee met in April, monetary policy had been tightened in response to very strong growth in demand and a significant pick-up in inflation during 2007.
The cash rate had been lifted by 100 basis points and financial intermediaries were facing additional increases in the cost of their funds, which they passed on to borrowers. This amounted to a significant tightening in financial conditions.