Reason number 1 is not unique to the RBA, sticky high inflation as confirmed by the most recent data:
- Australian Q1 CPI +1.0% q/q (expected 0.8%) 3.6% y/y (expected 3.4%)
- AUD/USD jumped above 0.6500 on higher than forecast inflation data for Q1 of 2024
The Wall Street Journal has a nice piece up dissecting the (ugly) data and on implications for the RBA. But it's the final part of the article that hits the home run (formatting mine, for emphasis):
The next few months are likely to witness such events as
- a reasonably big rise in the minimum wage of Australian workers
- and the delivery of generous income tax cuts midyear.
- These will coincide with a federal budget that is likely to include new spending measures designed to take the pain out of rising living costs.
As a result, economists are divided over whether the RBA will be confident enough that inflation is under control to cut interest rates this year, and some think it will be the last major central bank to loosen policy.
The Journal is gated, but if you can access it this is a good read.
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AUD/USD update:
