The US Federal Reserve’s new policies drafted to increase inflation are aimed to improve the country’s economy. However, these policies may weaken the dollar.
Peter Morici, an economist and professor at the University of Maryland, shared an article on how the Federal Reserve’s policies to increase inflation may threaten the dollar’s dominance as a global currency.
The article noted that although the Federal Reserve has announced the policy change, the central bank’s policy making powers have diminished over the years due to the globalisation of US securities markets and dollar’s dominance in global commerce.
The Federal Reserve needs to finance federal deficits and drive inflation by printing money to ensure the dollar’s dominance as the Chinese Yuan is fast emerging as a rival to the currency.
Meanwhile, India’s economic prospects look bleak, as the Covid-19 pandemic is affecting an economy that was already in slowdown.