These are not easy issues to determine with confidence, and have been complicated by the strong market reaction to the suggestion that the US Fed may begin slowing the pace of its bond-buying programme. Our core mandate remains price stability, so our primary objective is to keep inflation within the target range.
Currently our forecasts (and those of nearly all private sector analysts) suggest that inflation is likely to remain at the top of the band or slightly above, and then to return to within the target range. The downside risks to the growth outlook would suggest that we should tolerate inflation at these levels.