It’s as if there is an inclination to punish in those monetary economists. Here goes Australia, in the words of the official statement of the Bank after today’s board meeting, ” with growth expected to be close to trend and inflation close to target.” Perhaps the only downside is that the “labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months.”

But let’s not worry about those 5.2% of people without a job, or all those working less hours than they would like to. Put in the background the statutory requirement we have for the maintenance of full employment in Australia.” Let’s just keep things exactly as they are and leave official interest rates unchanged.

They are a callous lot.

And why? Is inflation going to become a trouble if rates are lowered? Well … no, not actually.

CPI inflation has declined as expected, as the large rises in food prices resulting from the floods a year ago have been unwinding. Year-ended CPI inflation will fall further over the next quarter or two. In underlying terms, inflation is around 2½ per cent. Over the coming one to two years, and abstracting from the effects of the carbon price, the Bank expects inflation to be in the 2–3 per cent range.

And later in the official statement they even concede the point that an interest rate reduction would cause no harm. As they said in that wonderful language of central bankers

Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy.

So what’s the reason for keeping the rate at 4.25% then? Well, it’s just that that is the kind of rate we have traditionally had.

At today’s meeting, the Board noted that interest rates for borrowers have declined to be close to their medium-term average, as a result of the actions at the Board’s previous two meetings. With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment.

We are bankers. We just feel happier being punishers.