The RBA appears set to continue its jawboning of the dollar. From Dow Jones:
“The depreciation has been pretty marked, and it’s not necessarily over, ” John Edwards, an external board member who helps shape interest-rate policy but doesn’t speak on behalf of the central bank, said in an interview. “There is a risk that [the currency] is going to fall further. I don’t think we should dismiss that.”
And on inflation:
“At this point I don’t think it is at all alarming,” Mr. Edwards said of the inflation data. “It is true that pass through of the exchange rate change into retail prices, which appeared in tradable inflation, was a bit quicker than generally,” he added.
Finally, on emerging market turmoil:
“I would not expect a big impact on global growth. Nor would I expect it to be very prolonged,” Mr Edwards said.
John Edwards said something like that before the long pain of the European crisis as well. Ironically, he will be right about the dollar if emerging market turmoil persists, as I think it will, until taper subsides and/or China stimulates.
But it’s still too slow for the economy and what’s coming. Relying on the US economy accelerating and a successful US tightening will also drag down the dollar but not as quickly as we need.
It would be better if the RBA had not broken its own jaw.
