Deutsche Bank: If the Fed chooses quantitative austerity instead of interest rate hikes, the dollar may get soft

On 16 July, George Saravelos, a German bank analyst, stated in a report that the United States dollar might get soft if the Federal Reserve shifted the focus of policy from interest rate hikes to balance sheet reductions (i.e. quantitative austerity) to tighten monetary policy. He said that Japan ' s experience was worth drawing on and that, despite the slow pace of interest rate hikes, the Central Bank of Japan had recovered liquidity at a record rate through quantitative austerity, while the yen remained at historically low levels. In addition, tightening the balance sheet could also create a policy conflict with the Trump Government, which has made it clear that it wishes to maintain a low rate of return on long-term national debt. He also stated that the independence of the Central Bank of Japan continued to receive market attention. The Japanese Minister of Finance Koyama-Moon has even discussed the use of domestic savings to support the Japanese bond market. Kim Xian