Several officials from the Federal Reserve expressed different views on the outlook for the US economy, inflation trends, and interest rate policies on Monday (February 17), sparking widespread market attention on the future trend of the US dollar. Although the overall attitude towards the current interest rate policy within the Federal Reserve is stabilizing, officials' differences on inflation, fiscal deficit, and economic prospects may have an impact on the US dollar.

Huck: Optimistic economic outlook supports stable interest rates

Philadelphia Federal Reserve Bank President Patrick Harker said at a conference in Nassau, Bahamas that the US economy "continues to operate strongly" and although inflation is high, it is expected to gradually ease. He supports the Federal Reserve's decision to maintain the interest rate target between 4.25% and 4.5%, and believes that the current policy stance is "fully reasonable".

Huck's optimistic attitude reflects the confidence within the Federal Reserve in economic resilience. However, he also emphasized that it will take time for inflation to fall back to the target of 2%, which means the possibility of interest rate cuts in the short term is low. This' wait-and-see 'attitude may provide support for the US dollar, as high interest rates typically attract foreign investment inflows and push up the US dollar exchange rate.

Waller: Fiscal deficit concerns push up long-term bond yields

Federal Reserve Governor Chris Waller pointed out that despite the Fed's interest rate cuts, long-term bond yields are still rising, mainly due to concerns about the huge US fiscal deficit. He stated that market participants are generally concerned about the pressure of financing deficits, which has led to an increase in the term premium of long-term bonds.

Waller's remarks reveal the market's concerns about the health of the US fiscal system. If the fiscal deficit problem continues to worsen, it may lead to a decrease in investors' confidence in US dollar assets, thereby putting pressure on the US dollar exchange rate. In addition, the increase in long-term bond yields may also suppress economic growth, further affecting the performance of the US dollar.

Bauman: Interest rate cuts require more evidence of inflation decline

Federal Reserve Governor Michelle Bowman has shown a more cautious attitude. She stated that before considering further interest rate cuts, more evidence is needed to prove that inflation will continue to decline. She specifically mentioned that the uncertainty of the Trump administration's trade and other policies may have complex impacts on inflation and the economy.

Bauman's hawkish stance indicates that the Federal Reserve still maintains a conservative attitude towards interest rate cuts. If inflation fails to decline as expected, the Federal Reserve may maintain high interest rates for a longer period of time, which will support the US dollar in the short term. However, in the long run, policy uncertainty may weaken market confidence in the US dollar.

The impact on the US dollar: short-term support and long-term concerns

Overall, the impact of Fed officials' statements on the US dollar shows a differentiation between short-term and long-term:

Short term support: Huck and Bauman's remarks indicate that the Federal Reserve is unlikely to cut interest rates in the short term, providing support for the US dollar. A high interest rate environment usually attracts foreign investment inflows, pushing up the US dollar exchange rate.

Long term concerns: Waller's worries about fiscal deficits and Bauman's warning about policy uncertainty may pose long-term pressure on the US dollar. If the fiscal deficit continues to worsen or inflation fails to decline as scheduled, the US dollar may face the risk of depreciation.

Market sentiment fluctuations: Internal divisions within the Federal Reserve may exacerbate market uncertainty, leading to increased volatility in the US dollar exchange rate. Investors need to closely monitor inflation data, fiscal policy trends, and policy signals from the Federal Reserve.

summary

The statements of Federal Reserve officials reveal the complex situation facing the US economy: on the one hand, economic resilience and high interest rate policies provide short-term support for the US dollar; On the other hand, fiscal deficits and policy uncertainty may pose long-term pressure on the US dollar. In the future, the trend of the US dollar will depend on the evolution of inflation, fiscal policy, and the global economic environment. Investors need to remain vigilant and respond flexibly to market changes.