Reserve Bank governor Philip Lowe may have to explain why the institution has failed to hit its inflation target under a plan being considered by Treasurer Josh Frydenberg.

The Treasurer confirmed on Wednesday he was considering a change in the formal agreement between himself and Dr Lowe that governs the relationship between the bank and the government.

The agreement, signed between then treasurer Scott Morrison and Dr Lowe soon after he became governor, shows both the RBA and government agree that a "medium-term inflation target" is the best way to manage prices.

RBA governor Philip Lowe might have to explain why the bank has failed to hit its inflation target under a plan being considered by the government Credit:Alex Ellinghausen

"They agree that an appropriate goal is to keep consumer price inflation between 2 and 3 per cent, on average, over time," it states.