Australia & Canada: explaining contrasting monetary policies

The contrasting monetary polices being pursued by the Bank of Canada and the Reserve Bank of Australia (RBA) are a good illustration of why only countries with strong trade and financial links to the US necessarily have to follow the Fed in cutting rates. Those countries where local conditions are very different and that are not heavily exposed to developments in the US may want to keep interest rates relatively high, or even raise them, to counter the inflationary impact of rapidly rising food and energy prices.