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Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching

Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.

This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.

All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.

<blockquote data-quote="CityIndex" data-source="post: 1160440" data-attributes="member: 87319">Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watchingEarlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.</blockquote>

[QUOTE="CityIndex, post: 1160440, member: 87319"] Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions. This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible. All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term. [/QUOTE]

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