This is a historic decision by the Central Bank of Australia. They decided today to increase their policy rate from 3% to 3.25%. Since the begining of the financial crisis, this is the first bank to make such a move. They will likely be followed by other Central Banks, although maybe with a significant delay. This decision is proof that what used to be the biggest risk - deflation - is now beaten and we can start looking forward. The massive monitary response (lowering of interest rates, quantitative easing and stimulus packages) has worked but we now need to start looking at how to manage the adverse consequences: a monetary policy too accomodating and huge debt. It will be a fine and difficult tuning for central bankers to stop monetary easing at or after there are clear signs of recovery and impending inflation. Some economists, like Paul Stiglitz beleive that we are not out of the woods yet. They invoke the fact that: - unemployement is big and rising, putting a drag ...