In view of Jane Foley, Senior FX Strategist at Rabobank, the market is currently anticipating that RBA will start its tightening cycle by the end of 2018.
“Australian policymakers appear to be particularly sensitive to the issues surrounding low wage growth, suggesting that the central bank may maintain a reluctance to tighten policy for some months to come. Given that the household debt to income ratio is high, it is possible that workers are no longer so prepared or able to keep running down savings to subsidise consumption.”
“Without a significant or sustained rise in wage inflation, the outlook for demand and consumption price inflation is likely to remain in check. The RBA’s December statement that “the Bank's central forecast remains for inflation to pick up gradually as the economy strengthens”, holds true but the word ‘gradually’ is a key component of this message. We retain a bearish view for AUD/USD in the coming months.”
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