BoB sticks to inflation-fighting plan

The BoB kicked off the three interest rate hikes it has made this year in April, saying while inflation is being driven by external costs rather than local demand, the rate actions were required to ensure that expectations of higher inflation do not become entrenched in the local economy.

The threat of inflation expectations becoming entrenched in the economy is associated with firms pricing their views of future inflation into their products and services, property owners doing the same with their rental reviews, workers with their wage demands and so on, which self-actualises into higher real inflation.