Second, the policy response needs a buffer to a certain extent. In order not to fall into deflation again, it is desirable to ensure that the inflation rate be positive to some extent. In general, a central bank can respond to higher inflation by raising its policy interest rate.
In Australian dollar terms, the IMF’s food price index that I showed earlier has increased by 40 per cent since 2004; this is substantially less than the increase in foreign currency terms, but significant nevertheless  3  See, for example, G20 (2011), p 17. BIS central bankers’ speeches  5  (Graph 6).