In response, we lowered our policy rate by 50 basis points to 3.50 per cent, and said that further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance and to achieve the 2 per cent inflation target over the medium term.
Both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, but the underlying trend of inflation is judged to be about 2 per cent, which is consistent with an economy that is running just above its production capacity.