The signalling channel also helps stabilise inflation expectations, thereby preventing an unwarranted tightening in real long-term rates with negative effects on investment and consumption. Impact on financial conditions How do we know that these positive effects of our policy package are indeed occurring and that they are sufficiently powerful to achieve the desired outcomes?
Much was made of China “missing” its 2014 growth target, by one tenth of a percentage point. (Let us in Australia hope our target misses are all only of that size.) Much was also made of the lower target set for 2015, but this was always going to occur, and successive growth objectives are likely to get progressively lower over the years ahead.