Reserve should lie low and keep its powder dry

A. (Mr Stevens takes this question.) That is a fair point, but it isn't that simple. You know that my consistent line has been that modest "real" interest rates, after adjusting for inflation, are an important part of a sensible set of policies. I accept there are some signs of deflationary pressures globally, and if these persist or get stronger we shall be recommending further cuts to interest rates.

Just at present, however, I would prefer to keep our powder dry. If there is a substantial deflationary shock, I will talk to you all even if it is between meetings and seek your agreement to a cut of 50 basis points in the cash rate.

Leaving rates where they are now for the time being feels right to me, but I assure you we will be watching developments overseas with the utmost diligence, and we have the ability to move decisively if that is needed.

Now if you are happy with the press release circulated earlier, we can have a bite to eat.