What is the target inflation rate set by the Reserve Bank of Australia?

The target inflation rate set by the Reserve Bank of Australia (RBA) is 2-3%. This target range is part of the RBA's monetary policy framework aimed at promoting price stability, which is considered essential for economic growth and stability. By targeting an inflation rate within this range, the RBA seeks to maintain price stability, which supports the overall economic environment, encourages consumer and business confidence, and aids in sustainable employment growth.

Setting the target at 2-3% allows for some flexibility in economic conditions, accommodating slight fluctuations that may occur due to various external factors. This target is viewed as conducive to economic growth while preventing both deflation and excessive inflation, which can have detrimental effects on the economy. The RBA believes that maintaining inflation within this range helps achieve the overarching goals of economic stability and prosperity.