Tags: US | Bernanke

Fed Chief Sees Delicate Dance Ahead

Sunday, 30 May 2010 08:34 PM

 

The delicate task ahead for the Federal Reserve and other central banks is deciding when to start boosting interest rates and reeling in all the stimulus pumped out during the global financial crisis, Fed Chairman Ben Bernanke said Sunday.

Bernanke, however, didn't provide any new clues on that front.

As is typically the case in the early stages of an economic recovery, central bank officials "will have to weigh the risks of a premature exit against those of leaving expansionary policy in place for too long," Bernanke said in prepared remarks to a conference sponsored by the Bank of Korea in Seoul, South Korea.

The Fed's chief's remarks were prerecorded and delivered via video link.

Tightening credit too soon risks short-circuiting countries' economic recoveries. Waiting too long could risk unleashing inflation and sparking a dangerous new wave of speculation like the one that powered the housing boom and its devastating bust.

Because economic conditions vary country by country, the appropriate time to start tightening credit, varies, too, Bernanke said. "To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction," he said.

In the United States, the Fed has held a key interest rate at a record low near zero since December 2008. Just last month, he repeated a pledge to hold rates at super-low levels for an "extended period" to nurture the fledging recovery.

Fears that a spreading debt crisis in Europe could hurt the U.S. recovery are prompting some economists to predict the Fed will be on the sidelines for longer than anticipated. A growing number of economists now think the Fed will hold rates at record lows — well into next year, or perhaps into 2012. Just a month ago, many had thought the Fed would start raising rates near the end of this year.

Under the leadership of its new governor, Kim Choong-soo, the Bank of Korea last month also left its key interest rate at a record low of 2 percent. Kim and other BOK policymakers must eventually decide when South Korea's economic recovery is strong enough to withstand higher borrowing costs.

Another challenge for central bank officials will be to make good use of the lessons learned during the global financial crisis, which hit its worst point in the fall of 2008, to sharpen its crisis-fighting tools, Bernanke said.

Countries, revamping financial regulations to better prevent another crisis, must work together to make sure the reforms are "consistent and coordinated across countries," Bernanke said. Congress is moving closer to a final package. On a global level, leaders of the Group of Twenty countries meet next month in Canada, where financial reform is a top issue.

© Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Army Officer: Bergdahl Charged With Desertion, WH Wants It Kept Quiet

Monday, 26 Jan 2015 23:06 PM

Army Sgt. Bowe Bergdahl has been charged with desertion, but the White House is trying to keep the story under wraps, a  . . .

Snowstorm Threatens to Paralyze Northeast for Days

Monday, 26 Jan 2015 18:12 PM

Tens of millions of people along the Philadelphia-to-Boston corridor rushed to get home and settle in Monday as a fearso . . .

Sen. Ayotte: Trading Terrorists for Citizens Sets Bad Precedent

Monday, 26 Jan 2015 22:23 PM

Sen. Kelly Ayotte told Fox News she is glad Rep. Duncan Hunter is asking questions about the timing of the release of an . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved