In late 1996, of course, the inflation target was amended from 0 to 2 per cent to 0 to 3 per cent and, though not requested by the Reserve Bank, this increased the scope for flexibility when faced with the many lags and uncertainties in setting monetary policy.
All of these factors drove us in the direction of being less concerned about the direct price effects of exchange rate movements and more concerned about the medium-term effects of interest rates and the exchange rate. Our focus lengthened from a primary interest in the next 12 months to an 18 to 24 month view.