One relevant example in Australia has been in the home-building sector. Over the past year, the cost of building a new home has increased by 20 per cent (Graph 6). This alone has added close to 2 percentage points to headline inflation.
In addition, the scope that central banks have to influence short-run activity and wage and price setting behaviour diminishes as interest rates approach zero, and the limits for quantitative easing are reached. Reflecting these constraints, central banks must make finely-balanced judgements when setting monetary policy.