WASHINGTON, Oct 15 (Reuters) – The Federal Reserve’s fast rate of interest will increase have contributed to the power of the greenback towards different currencies, however that will ease as soon as the U.S. central financial institution reaches the purpose of pausing the hikes, St. Louis Fed President James Bullard mentioned on Saturday.
Fed coverage “has produced a stronger foreign money,” Bullard mentioned at a financial coverage panel on the sidelines of the Worldwide Financial Fund and World Financial institution annual conferences in Washington. That will ease as soon as the Fed will get charges to a spot “the place the committee thinks we’re placing significant downward strain on inflation,” so charges need not proceed rising, he mentioned.
At that time, as different central banks modify their coverage, “you would possibly see different actions within the greenback.”
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The affect of Fed insurance policies on world monetary markets has been a serious theme of the IMF and World Financial institution conferences this week.
Bullard mentioned that whereas the Fed’s fast fee strikes this yr, with its goal coverage fee rising from the near-zero stage in March to the present 3.00%-3.25% vary and heading greater, has touched off a worldwide repricing of currencies, shares, bonds and different property.
However he mentioned he regarded the quantity of disruption as comparatively low given the pace with which the Fed has lifted borrowing prices.
The Fed has raised charges “with comparatively low turmoil in monetary markets,” Bullard mentioned. “Not zero, however comparatively low to what you would possibly anticipate given the pace at which we have moved.”
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Reporting by Howard Schneider; Enhancing by Paul Simao
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