The rising U.S. dollar has economists everywhere analyzing what the effects to U.S. growth will be, and those at the Federal Reserve are no exception.
As the central bank considers raising interest rates for the first time since 2006, “export growth has weakened — probably the strong dollar is one reason for that,” Chair Janet Yellen said during a press conference last week following a two-day Fed meeting. Projections released that same day showed officials cut their median estimate for the federal funds rate at the end of 2015 to 0.625 percent, compared with the 1.125 percent they saw in December. The 2016 year-end estimate fell to 1.875 percent from 2.5 percent.
Economics 101 dictates that a rising dollar makes U.S. goods more expensive to foreign buyers and may prompt them to purchase from elsewhere, and the data are backing up that tenet, with the value of exported goods falling 4.1 percent in January from the month before, the biggest decline since October 2012.