The Fed has been kind to emerging markets and Europe in some measure, It refrained from adding to instability in the financial world when it restrained from any move up in the rate. First Greece (read Europe) and now China is adding to the pressures on the Fed.
Te Fed, unlike the IMF or the BIS is not a multinational institution. US economy remains and will remain at the heart of its concerns. The evidence that it is seeking to pick up on the pick up of the US economy is surely there- may be though in driblets. As the data of a resurgent US economy is conclusive, the Fed has to but take note. Therefore, it cannot but move up the rates.
Te Fed, unlike the IMF or the BIS is not a multinational institution. US economy remains and will remain at the heart of its concerns. The evidence that it is seeking to pick up on the pick up of the US economy is surely there- may be though in driblets. As the data of a resurgent US economy is conclusive, the Fed has to but take note. Therefore, it cannot but move up the rates.
Federal Reserve Bank of Dallas' Globalization and Monetary Policy Institute,
in its
Working Paper No. 34 (by William White) points out that
'monetary policies designed solely to deal
with short term problems of insufficient demand could make medium term problems
worse by encouraging a build up of debt that cannot be sustained over time. The
conclusion reached is that monetary policy should be more focused on
“preemptive tightening” to moderate credit bubbles than on “preemptive easing”
to deal with the after effects. There is a need for a new macrofinancial
stability framework that would use both regulatory and monetary instruments to
resist credit bubbles and thus promote sustainable economic growth over time."
The Fed cannot ignore national interests. It will have to indulge in preemptive tightening.
The views expressed are purely academic without any risk or responsibility. This blog recommends no investment.
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