MNI BRIEF: FX Important Monetary Policy Channel - RBA Gov
Reserve Bank of Australia Governor Michele Bullock said the foreign-exchange market was an important channel for monetary-policy transmission and a weak Australian dollar could add to inflationary pressure.
Speaking at an industry conference, Bullock noted fx worked alongside intertemporal substitution, which incentivised savings across demographics.
The cash flow channel, or the impact of higher rates on the highly indebted, was not the only way hikes impacted the economy, she noted. People with mortgages were also incentivised to save – monetary policy works “we know it works, but it’s a blunt tool,” she added.