Economist Dario Perkins at TS Lombard believes this will give the Fed cause for caution on rate rises. “When there was a 20pc appreciation of the dollar a couple of years ago, it had a much more powerful effect on global economy than everyone expected – the Fed ignored it, and were still in this world where they thought they had basically a closed economy and it didn’t matter. But then they saw these powerful spillovers into emerging markets, then into oil prices, and then back into US again,” he said. “They were planning to raise interest rates quite aggressively, but then the dollar appreciated and they just couldn’t do it." New Fed chair Jerome Powell’s background in financial markets combined with this prior experience may cause the central bank to act more cautiously, he said.
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