Reserve Bank governor Phillip Lowe (Image: AAP/Joel Carrett)

The Reserve Bank (RBA) has made a major change in monetary policy with significant implications for the timing of interest rate movements in years to come. In effect, the bank has turned its back on old, established ways of reacting to events in the economy.

For years now central banks, including the RBA, have run monetary policy on the basis of what current data suggest might happen a little down the track in regard to their charter objectives -- in the RBA's case, inflation and employment.

The banks and many economists have come to rely on inflationary expectations as a key metric -- surveys of consumer sentiment (where questions about likely future price movements are asked), pricing through inflation linked bonds (such as those in the much watched TIPS, or Treasury Inflation-Protected Securities, market in the US) and feedback from businesses in regular surveys.