While the value of the Australian dollar has fallen significantly against the U.S. dollar this year, the depreciation is expected to contribute “only a very modest uplift” to inflation, according to a senior Reserve Bank official.
Christopher Kent, the assistant governor of the Reserve Bank of Australia (RBA), said while the Australian dollar has fallen 14 percent against the greenback, it was only down two percent in trade-weighted terms.
The trade-weighted index (TWI) was created by the Fed to measure the value of the U.S. dollar against other currencies.
“A rough rule of thumb from our models suggests that the level of the Consumer Price Index will be higher by only around 0.2 percent in total over the course of a few years,” Kent told the Commonwealth Bank Global Markets Conference on Oct. 24….