Federal Reserve Chairman Ben Bernanke on Sunday denied the U.S. central bank’s highly stimulative monetary policy hurts emerging economies, saying stronger growth in the United States bolsters global prospects as well. Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation. But in a speech in Tokyo, Bernanke addressed international critics of the policy who argue that the unorthodox Fed policies weaken the U.S. dollar and boost the value of developing country currencies, hurting their ability to export. Bank of Israel Governor Stanley Fischer said the world is “awfully close” to a recession, and backed the Federal Reserve’s increase in quantitative easing as strengthening its policy credibility after Ben Ben Bernanke’s Tokyo speech yesterday.
Ben Bernanke stated,“It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,” Ben Bernanke said today in prepared remarks for a seminar in Tokyo on the last day of International Monetary Fund annual meetings. His comments contrasted with those of IMF Managing Director Christine Lagarde, who told the same audience that such easing is likely to cause large and volatile flows that risk leading to “overheating, asset-price bubbles and the build-up of financial imbalances” in emerging economies, even as she applauded Fed efforts to boost growth.
Stanley Fischer Backs Fed QE3 as World ‘Awfully Close’ to Recession: Bank of Israel Governor Stanley Fischer said the world is “awfully close” to a recession, and backed the Federal Reserve’s increase in quantitative easing as strengthening its policy credibility. While there has been “a lot of progress made” to improve the global economy, its impact hasn’t materialized, Fischer said in an interview in Tokyo with Bloomberg Television airing today.
He signaled that by deciding not to set an end date or total amount to its third program of bond buying, the Fed is easing worries it will run out of ammunition before achieving its goals. Stanley Fischer’s take on global growth added to concern raised at annual meetings of the International Monetary Fund, with the IMF cutting its forecasts on Oct. 9 and warning of more weakness unless the U.S. and Europe address threats to their economies. As the euro crisis drags on, fiscal tightening and muted demand in wealthy nations hurts emerging countries from China to Brazil.