to be seen Former Federal Reserve Chairman Alan Greenspan“favorable winds” will hit the dollar next year even as US policymakers slow or stop their current campaign to raise interest rates.
Although, as some forecasters predict, US inflation peaks in the first half of 2023 and the Federal Reserve manages to slow or even stop the pace of interest rate hikes, Greenspan, who is currently Chief Economic Advisor to Advisors Capital Management said: The US dollar will continue to be driven by the strength of monetary policies.
Greenspan noted that the dollar’s gains are driven by the Fed’s steeper trajectory than many of his peers.
The Bloomberg Spot Dollar Index rose more than 13% this year as currencies, including the yen, pound and euro, hit multi-year lows against the dollar.
The Federal Reserve raised interest rates by 75 basis points for the fourth consecutive time on Wednesday, to a range of 3.75 to 4% in an effort to curb the highest inflation of the past 40 years. In contrast, the interest rate on deposits at the European Central Bank is currently 1.5%, according to the Bloomberg agency, which was viewed by Al Arabiya.net.
Greenspan explained that the continued strength of the US dollar in the future could be attributed to the reduction of $ 95 billion per month in the Federal Reserve’s balance sheet.
Federal Reserve policymakers are allowing up to $ 95 billion a month in central bank bonds to maturity with no reinvestment, a move known as quantitative tightening.
“The fact that the supply of US dollars can be expected to steadily decrease makes it a better store of value,” Greenspan said.
