Source: Finance Federation Author: Huang Junzhi

Goldman Sachs Group said in its latest report that if the Federal Reserve remains “on hold” and keeps interest rates stable, while other countries choose to lower borrowing costs, the US dollar may remain strong for a longer period of time.

The bank's strategist, headed by Kamakshya Trivedi and Joseph Briggs, wrote in the report, “If the Fed remains stable, but more countries and regions decide to continue to implement easing policies rather than wait for the Fed to act, then policy differences may strengthen the dollar for a longer period of time.”

In fact, since this year, the US dollar has risen against all Group of 10 (G10) currencies, and Bloomberg's index tracking the trend of the US dollar has risen by nearly 3%.

Policy differences widen

Goldman Sachs analysts expect Canada, the UK, and the Eurozone to cut interest rates in June. Meanwhile, the future trend of Yang Ma around the world also seems to be more and more like what the bank is expecting now.

On Tuesday, Federal Reserve officials took turns calling for patience with the timing of the “first interest rate cut.” Governor Waller said that it will take a few more months to see good inflation data before starting to cut interest rates; Atlanta Federal Reserve Bank Governor Bostic pointed out that the Federal Reserve needs to be cautious when approving the first rate cut, adding that he still expects inflation to drop slightly during the year, and it is appropriate to cut interest rates once by the fourth quarter.

Michael Barr (Michael Barr), the Federal Reserve's vice chairman responsible for overseeing financial affairs, shared this view. He said, “At least for me, this means we need to hold out longer than previously thought... we need to see more evidence that inflation continues to progress so we can consider adjusting policy interest rates.”

On the same day, European Central Bank (ECB) President Christine Lagarde (Christine Lagarde) hinted that since the trend of rapid consumer price growth has now been largely contained, interest rates may be cut next month. She said, “If the data we receive strengthens our confidence, there is a high possibility that action will be taken on June 6.”

“protracted war”

Goldman Sachs has previously pointed out that even in the context of the Federal Reserve's slow refusal to cut interest rates, central banks in other countries may choose to follow the Federal Reserve's footsteps in the short term, making it difficult to cut interest rates hastily. However, in the long run, due to fundamental differences in inflation trends between the US and other countries, currencies sensitive to policy changes, especially the euro, may eventually decline further.

“This trend is likely to continue as differences in inflation trends across countries continue to affect the market and central bank's responses.” The bank added.

Goldman Sachs analysts wrote in their latest report: “In a situation where macroeconomic policies and potential policy differences have become more obvious, policymakers have been closely watching the measures taken by the Federal Reserve to limit the extent of currency fluctuations.”

“If central banks around the world start cutting interest rates relatively earlier and more aggressively than the Federal Reserve, it may help the US achieve its inflation target.” they added.

edit/lambor