This has been true both before and after we started raising rates. For these reasons, proponents of lower interest rates irrespective of the inflation rate remind me of the proverbial dogs chasing cars. The dog is unlikely to catch the car, and will be in trouble if it does – credit extension may continue to be weak while inflation rises.
This characterises the 2011 to 2014 period well. There are, of course, some forms of credit growth we would like to see, particularly those which support investment, but a strong rise in household debt seems like an unsustainable growth model. 6  Third, we need to keep an eye on international competitiveness.