The dollar’s depreciation could change the monetary policy of central banks

Madrid.- Central banks disagree on their monetary policies and have already begun to stage it in their latest meetings, where the ECB continues with paused rates, which could change in the face of the weakness of the dollar and the volatility in raw materials, while the Fed receives pressure to lower rates. The European Central Bank (ECB) kept rates at 2% for the fifth consecutive time, with inflation expected to stabilize at the 2% target in the medium term, but without committing to a specific path, as it depends on economic data. Analysts were convinced that the ECB would hold rates at 2% in 2026, but a strengthening of the euro could lead to downward revisions, although the president herself, Christine Lagarde, believes that the disinflationary effect of the appreciation is already incorporated. For underlying inflation forecasts to be adjusted downwards, the euro-dollar exchange rate should approach, according to analysts, the range of 1.22-1.25 dollars.

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According to Vanguard economist Josefina Rodríguez, the risk of inflation falling below the target for a prolonged period means that the bias remains towards further monetary easing rather than tightening. This week, the Bank of England also held interest rates, at 3.75%, and cuts are not ruled out with inflation exceeding 3%.

Kevin Warsh, a Plot Twist for the Fed

In the United States, the debate centers on whether there will be rate cuts after Kevin Warsh has been nominated by the country’s president, Donald Trump, to chair the Fed, replacing Jerome Powell, whose term ends in May. IG analyst Sergio Ávila believes that if the Fed continues on the path of prudence, data dependence, and the risk of inflation, rates will remain high for longer, while if there are cuts it will be fuel for equities and credit. Mutualidad’s Investment Director Pedro del Pozo believes that a less expansionary Fed in the hands of Warsh could imply fewer, slower, and conditional rate cuts.

Australia, the Last Discordant Note

In addition to the Fed, the ECB and the Bank of England, the Bank of Canada also left rates unchanged, at 2.25%. The Norges Bank did the same, at 4%, and so did the Swedish Riksbank, at 1.75%. Faced with this, the Reserve Bank of Australia raised rates by 0.25% to 3.85%, the first time since November 2023, due to high inflation, at 3.80% compared to 2.1% last June, and further increases are not ruled out. You can also read: The Swiss National Bank is the only one that sets the reference interest rate at 0% after being the first entity to start cuts in 2024 and end them in the middle of last year. The Bank of Japan maintains rates at 0.75% after raising them last December to their highest level in 30 years; while in China, the prime loan rate remains at 3% and the benchmark for mortgages at 3.5%. Finally, the Reserve Bank of India left rates at 5.25% this Friday, but could lower them this year given dynamic growth and the agreements reached with Europe and the United States on tariffs.