Puzzle of US Monetary Normalization Policy

With excessive global liquidity, the rise of interest rates in the US and the downsizing of the balance sheet of the Fed have greater potential to cause capital outflows from emerging economies. In the future, the US dollar exchange rate will tend to strengthen until the normalization process is completed in 2020.

KOMPAS/DIDIE SW

.

The United States monetary normalization policy does not have great potential to cause a global financial crisis, especially due to capital outflows.

However, with excessive global liquidity, the rise of interest rates in the US and the downsizing of the balance sheet of the US Federal Reserve (Fed) have greater potential to cause capital outflows from emerging economies. In the future, the US dollar exchange rate will tend to strengthen until the normalization process is completed in 2020.