Deutsche Bank: If the Federal Reserve chooses quantitative tightening instead of raising interest rates, the U.S. dollar could weaken

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Mars Finance news, on July 16, Deutsche Bank analyst George Saravelos said in a report that if the US Federal Reserve shifted its policy focus from rate hikes to reducing its balance sheet (i.e., quantitative tightening) to tighten monetary policy, the US dollar could weaken. He said Japan’s experience is worth learning from: although the Bank of Japan’s rate-hike pace is slow, it has been withdrawing liquidity via quantitative tightening at a record speed, and the yen is still at historic lows. In addition, tightening the balance sheet could also conflict with the Trump administration’s policies, since the Trump administration has clearly said it wants to keep long-term Treasury yields at relatively low levels. He also said the independence of the Bank of Japan remains a matter of market attention. Japan’s Finance Minister, K. Hayato Katayama, even discussed using domestic savings to support Japan’s bond market. (Jin Shi)
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