The US, of course, scored poorly all round: it has had a high and widening current account deficit, low interest rates, and a continued disappointing growth outlook. But what of the rise against the Australian dollar? First, we’ve had higher interest rates than Australia (and the gap has increased somewhat) in a period when secure fixed income returns have been particularly attractive.
My overall assessment is that the current stance of monetary policy is generally appropriate, in that it is providing support to the economy by encouraging further labor market improvement that will help return inflation to 2 percent.