If that was the only way the RBA conducted its role, it would seem strange for the bank to keep pushing up interest rates with so much uncertainty around the banking sector. But central banks can and do separate the health of the economy from financial stability issues.

The best recent example of central banks’ ability to walk and chew gum occurred in Europe last week.

The European Central Bank pushed up its key lending rate by half a percentage point to 3.5 per cent despite the tremors surrounding Credit Suisse. The ECB noted that while there was an elevated level of uncertainty around the financial and economic outlook, its focus remained on inflation.

“Inflation is projected to remain too high for too long,” it declared.

The doubts caused by the banking issues in the United States and Europe are already having an impact on the global economy and inflation.

The price of crude has slipped by about 17 per cent since March 6. That should ease some inflation pressures but is a long way short of the collapse in oil prices during the global financial crisis, during which it fell from a record $US147 a barrel to $US34 a barrel within five months.

Westpac chief economist Bill Evans last week changed his view on the bank’s next actions, predicting a pause at April’s meeting in part because of the issues flowing out of the US and Europe.

AMP Capital chief economist Shane Oliver admits it’s unclear if the current crisis will end in economic tears, but says central banks such as the RBA will have to tread carefully over the coming weeks.

“Central banks will need to move more cautiously in terms of interest rates as we know from history that financial crisis lead to tighter bank lending conditions ... and this will adversely affect economic growth, which adds to the already high risk of recession in the US and Europe,” he said.

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“Weaker global growth will in turn impact Australia, even though our banks are less vulnerable to the issues impacting banks in the US and Europe – adding to the risk of recession here flowing from significant rate hikes.”

In a speech on Monday, RBA assistant governor Chris Kent signalled the bank’s focus remained on the inflation threat facing the country.

He noted the millions of people who took out ultra-low fixed-rate mortgages during the COVID-19 pandemic were still to feel the full brunt of the RBA’s higher interest rates. Many of them, Kent suggested, had not even started preparing for the soon-to-come day when their cheap fixed-rate mortgage became a pricey variable-rate loan.

“The [bank] board will respond as necessary to bring inflation back to target in a reasonable time,” he said.

Kent also noted that Australian banks were “unquestionably strong” and were continuing to benefit from “the strength of their balance sheets”.

They did not sound like the words of a central banker about to blink because of the plight of banks in America and Europe.

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.