Calls for a reduction in interest rates are putting too much emphasis on the change in conditions.

It is true that unemployment is rising, inflation is falling (depending on the measure) and that many measures of activity are weakening.

However, the RBA’s objectives are in levels. Despite recent changes, the outlook is for inflation to be above its target of 2.5% and unemployment to be below the NAIRU, estimated to be 4.5%.

Tighter interest rates would bring these variables closer to their targets, so is preferable.

Note that the economic outlook, and hence the story above, are little changed from early this year.