Bullish dollar momentum from interest rate hikes may wane as Fed pauses rate hikes: Bullard

The rapid rise of interest rates by the Federal Reserve have contributed to the strength of the dollar in front of others foreign exchangebut that could ease once the US central bank pauses hikes, St. Louis Fed President James Bullard said on Saturday.

The Fed’s policy “has produced a stronger currency,” Bullard said at a monetary policy panel on the sidelines of the Fed’s annual meetings. International Monetary Fund and the World Bank in Washington.

This situation could subside once the Fed has reached a point “where the committee feels we are putting significant downward pressure on inflation” so that further rate hikes are not necessary, he noted.

At that point, as other central banks tighten policy, “you could see other moves in the dollar.”

The impact of Fed policies on global financial markets has been one of the main topics at this week’s IMF and World Bank meetings.

Bullard said the Fed’s rapid moves this year, raising its target interest rate from near-zero in March to the current 3%-3.25% range and heading higher, have sparked a global rally. of currencies, stocks, bonds and other assets.

However, he sees the degree of shock as relatively low, given how quickly the Fed has raised borrowing costs.

The Fed has raised rates “with relatively little turmoil in financial markets,” Bullard said. “Not zero, but relatively low by what you’d expect given the speed at which we’ve moved.”