Fed’s Bullard: dollar may weaken soon

The Fed's rapid interest rate hike has helped strengthen the dollar against other currencies, but that positive effect could wane once the U.S. central bank pauses rate hikes, said James Bullard, president of the St. Louis Fed.

The Fed's policy "has led to a strengthening of the currency," Bullard said at a monetary policy panel on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington. The FRB president noted the possible weakening of the dollar if the Fed brings rates to a level where the committee believes they will exert significant downward pressure on inflation. Thus, a rate hike would no longer be necessary.

The Fed's sharp interest rate change this year has caused a global revaluation of currencies, stocks, bonds and other assets, as the target interest rate rose from near zero in March to the current range of 3.00-3.25%, with a subsequent upward trend.

However, Bullard does not consider the amount of disruption in the financial system to be relatively serious, given the speed at which the Fed has raised the cost of borrowing.

According to him, the Fed raised rates with relatively little disruption in the financial markets: not zero, but relatively low compared to what one would expect given the speed at which they moved.