This isn't a question so much about shares but its a very beginner question so I will ask in here.
I understand that its a very complex system and there are surely whole books on the subject but I wouldn't mind a quick dumb downed version so when I do start reading some literature I wont be overwhelmed.
From what I understand the reserve banks goal is to try and keep inflation around the 2-3% mark to try and keep a healthy economy.
They do this by increasing or decreasing the interest rates because high rates means less borrowing and more saving for people and vice versa.
So if the economy is slowing down, rates are dropped and people take out loans and spend cash to stimulate the economy.
But where do the inflation figures come from? is it from the XJO? if the XJO was flat lining and there was no real growth would this indicate no inflation where if the XJO was increasing rapidly would this indicate high inflation?