Deutsche Bank Warns Dollar Weakens If Fed Prioritizes Quantitative Tightening Over Rate Hikes

Deutsche Bank analyst George Saravelos argues that shifting Fed focus to QT rather than rate hikes could weaken the USD, citing Japan's experience and potential policy conflicts with the Trump administration.

Woofun AI reports that Deutsche Bank analyst George Saravelos stated in a report that the US dollar may weaken if the Federal Reserve prioritizes balance sheet reduction over interest rate hikes to tighten monetary policy. He cited Japan as a precedent, noting that despite slow rate increases, the Bank of Japan’s rapid quantitative tightening has coincided with the yen remaining at historical lows.

Furthermore, Saravelos highlighted potential policy conflicts with the Trump administration, which seeks to keep long-term bond yields low. He also observed that market attention remains on the Bank of Japan’s independence, particularly after Finance Minister Taro Aso discussed using domestic savings to support the Japanese bond market.