One irony is that the more investors believe the
central bank will soon raise rates the more the dollar appreciates, and in
turn, the more inflation will fall short of the Fed’s goal. Nariman Behravesh, chief economist at IHS Inc. in
Lexington, Massachusetts, said that while the lack of inflation may play a role
in whether the Fed will begin to raise rates in June or September, one thing is
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With cheaper energy already depressing prices “the stronger
dollar is one more source of good deflation,” which contrasts with a harmful
drop in prices generated by slumping demand, he said. “It’s back-to-back good
news for the consumer.”
“Appreciation is likely to persist as long as U.S.
monetary policy is expected to diverge from that of other major economies,”
said Carl Riccadonna, Bloomberg Intelligence chief U.S. economist.Higher U.S.
borrowing costs make investing in dollar-denominated securities more attractive
relative to its counterparts that are still loosening monetary policy.
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