How to solve a problem like the dollar

The US is running a current account deficit larger than that of any other of the world's major developed economies. But its return to a sustainable level could see some major upheavals for the economy - and a weaker currency.

So Ben Bernanke has been called in by worried congressmen to explain US monetary policy. The wording of the statement accompanying the March Open Markets Committee meeting has been pored over in minute detail and time and again by financial market Kremlinologists seeking to get to the bottom of what Mr Bernanke's coterie really mean. We agree with the Financial Times leader article (27th March) which draws attention to the scope for confusion implicit within the absence of an official inflation target and where, as a nominal demand manager, senior Fed officials have constantly to walk the tightrope between concern over inflation and concern over growth and its impact on employment. But whilst we accept the statement's opacity we have a strong view as to which side Fed officials should be leaning.

The outlook for the dollar

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