To be sure, if I allowed inflation to climb to just 4 or 5 per cent, the effect would be more subtle than the damage done when we had much higher inflation back in the 1970s and 1980s.
But 4 to 5 per cent inflation would add nothing to New Zealand’s enduring growth rate and it might well trigger a larger inflation problem later on. So I have committed to deliver a trend rate of inflation consistent with the 1 to 3 percent range in the new Policy Targets Agreement.