Australian inflation is still tracking below the RBA's targeted range of 2%-3% after the key consumer price index (CPI) data this morning showed seasonally adjusted inflation of 1.8% for the period December 2017 to December 2018.
The RBA is mandated to keep inflation between 2%-3% in order to 'maintain price stability' and the value of money while stoking growth and consumption via increased demand.
The big stick the central bank has in its arsenal to boost inflation is to adjust the cash rate (proxy lending rate) lower from its current level of 1.5%, although the central bank continues to hint it expects the next move in cash rates to be higher depending on future data points.
Today's data that showed quarterly inflation sits at 0.4% is largely in line with forecasts and will do little to change the RBA's view that it can sit on its hands while it waits for earlier stimulatory measures or rate cuts to flow through to the real economy in terms of wage growth and other inflation.
The RBA is hesitant to cut rates as it fears re-inflating the Sydney and Melbourne property bubbles, while running out of ammo to support the economy if it runs into really hard times on the back of a substantial global macro downturn in 2019 for example.
I expect the RBA might have to cut rates again towards the end of 2019, which is likely to put more pressure on the Aussie dollar.
As such I'd suggest investors look to companies that make money in US dollars such as Amcor Limited (ASX: AMC) or ResMed Inc. (ASX: RMD) for the best investing returns in the years ahead.
