2216 GMT - Recent AUD/USD weakness has been cited as a headwind to the Reserve Bank of Australia cutting interest rates in February. Still, the central bank will probably press ahead with a reduction regardless, says Ben Jarman, chief economist at JP Morgan, Australia. The movement in the AUD trade-weighted index usually has a greater impact on imported inflation than bilateral rates. Empirically the pass-through from changes in the TWI to inflation is quite small, Jarman adds. All else being equal, RBA rules of thumb imply the decline in the TWI since November should only lift CPI by 0.2 percentage points over a few years, he says. Also, the rise in bond yields recently has countered some of the slippage in financial conditions tied to a weaker exchange rate, Jarman adds. (james.glynn@wsj.com; @JamesGlynnWSJ)
(END) Dow Jones Newswires
January 19, 2025 17:16 ET (22:16 GMT)
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