Australian Dollar mildly down ahead of US inflation data

Central
Banks
have
a
key
mandate
which
is
making
sure
that
there
is
price
stability
in
a
country
or
region.
Economies
are
constantly
facing
inflation
or
deflation
when
prices
for
certain
goods
and
services
are
fluctuating.
Constant
rising
prices
for
the
same
goods
means
inflation,
constant
lowered
prices
for
the
same
goods
means
deflation.
It
is
the
task
of
the
central
bank
to
keep
the
demand
in
line
by
tweaking
its
policy
rate.
For
the
biggest
central
banks
like
the
US
Federal
Reserve
(Fed),
the
European
Central
Bank
(ECB)
or
the
Bank
of
England
(BoE),
the
mandate
is
to
keep
inflation
close
to
2%.

A
central
bank
has
one
important
tool
at
its
disposal
to
get
inflation
higher
or
lower,
and
that
is
by
tweaking
its
benchmark
policy
rate,
commonly
known
as
interest
rate.
On
pre-communicated
moments,
the
central
bank
will
issue
a
statement
with
its
policy
rate
and
provide
additional
reasoning
on
why
it
is
either
remaining
or
changing
(cutting
or
hiking)
it.
Local
banks
will
adjust
their
savings
and
lending
rates
accordingly,
which
in
turn
will
make
it
either
harder
or
easier
for
people
to
earn
on
their
savings
or
for
companies
to
take
out
loans
and
make
investments
in
their
businesses.
When
the
central
bank
hikes
interest
rates
substantially,
this
is
called
monetary
tightening.
When
it
is
cutting
its
benchmark
rate,
it
is
called
monetary
easing.

A
central
bank
is
often
politically
independent.
Members
of
the
central
bank
policy
board
are
passing
through
a
series
of
panels
and
hearings
before
being
appointed
to
a
policy
board
seat.
Each
member
in
that
board
often
has
a
certain
conviction
on
how
the
central
bank
should
control
inflation
and
the
subsequent
monetary
policy.
Members
that
want
a
very
loose
monetary
policy,
with
low
rates
and
cheap
lending,
to
boost
the
economy
substantially
while
being
content
to
see
inflation
slightly
above
2%,
are
called
‘doves’.
Members
that
rather
want
to
see
higher
rates
to
reward
savings
and
want
to
keep
a
lit
on
inflation
at
all
time
are
called
‘hawks’
and
will
not
rest
until
inflation
is
at
or
just
below
2%.

Normally,
there
is
a
chairman
or
president
who
leads
each
meeting,
needs
to
create
a
consensus
between
the
hawks
or
doves
and
has
his
or
her
final
say
when
it
would
come
down
to
a
vote
split
to
avoid
a
50-50
tie
on
whether
the
current
policy
should
be
adjusted.
The
chairman
will
deliver
speeches
which
often
can
be
followed
live,
where
the
current
monetary
stance
and
outlook
is
being
communicated.
A
central
bank
will
try
to
push
forward
its
monetary
policy
without
triggering
violent
swings
in
rates,
equities,
or
its
currency.
All
members
of
the
central
bank
will
channel
their
stance
toward
the
markets
in
advance
of
a
policy
meeting
event.
A
few
days
before
a
policy
meeting
takes
place
until
the
new
policy
has
been
communicated,
members
are
forbidden
to
talk
publicly.
This
is
called
the
blackout
period.