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Commentary: U.S. needs to communicate more with others on "tapering"

English.news.cn   2013-09-19 18:28:50            

by Lu Rui

BEIJING, Sept. 19 (Xinhua) -- The Fed's "no taper yet" decision seems prudent at the moment as the global economic outlook remains gloomy.

The surprising move was welcomed by investors worldwide who would like Washington's monthly bond buying program to continue. It also reflects U.S. policymakers' concerns on the strength of the recovery of the world's largest economy.

However, while the unconventional monetary measure may be effective in boosting market confidence in the short run, the flip side is also evident:

It increases global liquidity, exacerbates instability of international capital flows and pushes up prices of bulk commodities.

As a result, emerging markets and developing countries were put under greater pressures of imported inflation, hot money inflows and currency appreciation.

A disorderly tapering could trigger worldwide market turbulence, causing negative spillover effects such as increasing volatility in cross-border capital flows, the global currency market, asset prices and bulk commodity prices.

It could also make it harder for the emerging countries to exert macroeconomic control and pursue structural reforms.

In that sense, the U.S. should remain sober-headed in making decisions on the quantitative easing, or QE, and always keep a close eye on the medium- and long-term risks.

So far, the Fed has put in place four rounds of QE. And in fact, since the onset of the latest global financial turmoil, developed economies like the United States, Japan and Europe all have adopted QE-like tactics to varying degrees.

The QE may have helped the U.S. to reduce the impact of the latest financial crisis and contributed to sustaining the economic recovery, but clearly, it is no panacea.

It is the hope of the emerging markets that the U.S. and other advanced economies could step up coordination and communication with the rest of the world on the timing and steps of the so-called tapering, so that the markets could have reasonable expectations.

By doing so, global financial volatility could also be averted and hopefully negative spillovers could be reduced to the minimum.

Related:

News Analysis: U.S. stocks cheer on Fed's "no taper" but some voice concerns

NEW YORK, Sept. 18 (Xinhua) -- The decision of the U.S. Federal Reserve on Wednesday to keep its bond-buying program in place surprised Wall Street, but in the meantime boosted the Dow Jones Industrial Average and the S&P 500 to new historical highs in a double shock.

Traders and analysts believe the Fed's decision to delay tapering is positive for the equity market in the short term, but longer term a number of issues could weigh on stocks, with some traders expressing concern that a delay may create asset bubbles. Full story

 

Dow, S&P 500 set record highs on Fed's "no taper" decision

NEW YORK, Sept. 18 (Xinhua) -- U.S. stocks surged Wednesday, with the Dow Jones Industrial Average and the Standard & Poor's 500-stock Index soaring to uncharted territories, as the U.S. Federal Reserve unexpectedly kept its bond buying programs in place after a two-day policy meeting.

The Dow rallied 147.21 points, or 0.95 percent, to 15,676.94 points. The S&P 500 leapt 20.76 points, or 1.22 percent, to 1,725. 52 points. The Nasdaq Composite Index rose 37.94 points, or 1.01 percent, to 3,783.64 points. Full story

 

UAE banking official welcomes Fed withdrawal on stimulus tapering

DUBAI, Sept. 19 (Xinhua) -- The chairman of the United Arab Emirates (UAE) banking federation on Thursday welcomed the U.S. Federal Reserves' (Fed) decision not to reduce monetary easing as yet, although the breathing space would be short.

Speaking to Xinhua on the sidelines of the global financial summit Sibos, held for the first time in the Middle East, Abdulaziz Al Ghurair said "I think it (the withdrawal) is good as long as we can afford it, but eventually this will stop." Full story

Editor: Fu Peng
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