Advanced economies should keep rates low: IMF
AFP
Thu Dec 10, 4:50 pm ET
NEW YORK (AFP) – Advanced economies should maintain loose monetary policies and extra-low interest rates for "some time" to ensure a global economic recovery stays on track, a top IMF official said Thursday.
"With generalized inflationary pressures absent in most advanced economies at this time, monetary policy most likely can remain accommodative for some time, especially in many advanced economies," said John Lipsky, deputy managing director of the International Monetary Fund.
Speaking to the Japan Society in New York, Lipsky reiterated that the IMF wants member nations to continue stimulus efforts as long as necessary, warning that the recovery remained "tentative" in many places and "the upturn is still vulnerable to new shocks."
Still, he again called on governments to prepare "exit strategies," notably on budget policy.
"Monetary policy typically can adapt more readily than discretionary budget policy to changing circumstances," he said, according to the text of his speech.
Lipsky's comments came as central banks of the three global economic powers hold rates at extremely low levels -- essentially zero in the United States and Japan and 1.0 percent in the eurozone -- and show no intention of tightening credit anytime soon.
To restore strong, sustainable global growth, the senior IMF official recalled, the institution proposes an increase in domestic demand in Asian emerging economies, such as China, while deficit countries would need to "contribute importantly" to the rebalancing process.
"In these countries, including the United States, fiscal consolidation is imperative," he said as the US budget deficit is forecast to hit a record above 1.5 trillion dollars for the current fiscal year, according to official US data.
Lipsky stressed that exchange-rate policy imbalances pose a major challenge to balanced economic growth.
"Based on our analysis, many Asian countries' currencies are undervalued relative to their major trading partners when viewed in the context of medium-term, multilateral equilibrium values," he said.
"As long as this condition persists, balanced global growth will be difficult to achieve. While these policies should be analyzed in a broad context, it seems inevitable that increased currency flexibility in many Asian countries, including China, will form part of the rebalancing effort."
AFP
Thu Dec 10, 4:50 pm ET
NEW YORK (AFP) – Advanced economies should maintain loose monetary policies and extra-low interest rates for "some time" to ensure a global economic recovery stays on track, a top IMF official said Thursday.
"With generalized inflationary pressures absent in most advanced economies at this time, monetary policy most likely can remain accommodative for some time, especially in many advanced economies," said John Lipsky, deputy managing director of the International Monetary Fund.
Speaking to the Japan Society in New York, Lipsky reiterated that the IMF wants member nations to continue stimulus efforts as long as necessary, warning that the recovery remained "tentative" in many places and "the upturn is still vulnerable to new shocks."
Still, he again called on governments to prepare "exit strategies," notably on budget policy.
"Monetary policy typically can adapt more readily than discretionary budget policy to changing circumstances," he said, according to the text of his speech.
Lipsky's comments came as central banks of the three global economic powers hold rates at extremely low levels -- essentially zero in the United States and Japan and 1.0 percent in the eurozone -- and show no intention of tightening credit anytime soon.
To restore strong, sustainable global growth, the senior IMF official recalled, the institution proposes an increase in domestic demand in Asian emerging economies, such as China, while deficit countries would need to "contribute importantly" to the rebalancing process.
"In these countries, including the United States, fiscal consolidation is imperative," he said as the US budget deficit is forecast to hit a record above 1.5 trillion dollars for the current fiscal year, according to official US data.
Lipsky stressed that exchange-rate policy imbalances pose a major challenge to balanced economic growth.
"Based on our analysis, many Asian countries' currencies are undervalued relative to their major trading partners when viewed in the context of medium-term, multilateral equilibrium values," he said.
"As long as this condition persists, balanced global growth will be difficult to achieve. While these policies should be analyzed in a broad context, it seems inevitable that increased currency flexibility in many Asian countries, including China, will form part of the rebalancing effort."