Central banks will be more attentive to income growth
Japan watchers would have taken note how the policy focus of late has shifted away from simple deflation prevention towards wage growth: the former is easy to achieve through quantitative policy but without the latter materialising, stimulus could do more than harm. Not only in the G3, but now from Australia to Sweden, lack of wage-led income growth is starting to move up policy agendas, and perhaps causing central banks to become too belligerent on FX pass-through as a blunt force. For the Eurozone, simple deflation prevention is the priority, but income growth cannot be far behind.
Read the full report: UBS