The monetary policy decision is relatively simple.

The outlook is for inflation to remain above the midpoint of the target, 2.5%, and for the unemployment rate to be below estimates of its sustainable rate, 4.5%.

A higher path for the cash rate would bring inflation and unemployment closer to their targets.

Central banks try to stabilise inflation for good reasons. Without a tightening in policy, a prolonged period of above-target inflation would be likely to increase inflation expectations, leading to a substantial increase in unemployment. The cost of reducing this risk is a modest increase in unemployment in the short run. An increase in the cash rate now would deliver lower more stable unemployment in the long run.