Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street, says the Federal Reserve must ignore its critics and continue to worry about global economic problems.
“Many have complained that the Fed, by concerning itself with weakness in the world economy, is adding a "third mandate" to its congressionally mandated "dual mandate." The Fed, by statute, is supposed to ensure stable prices and maximum sustainable employment,”
he writes on CNBC.com.
“Reacting to the world economy, they say, is not part of that process. But it is … if that worldwide weakness threatens to affect domestic activity. Hence, the Fed's recent actions are consistent with its mandate to do what is best for the U.S. economy, all variables considered,” he wrote.
To be sure, the global economic malaise is slowly but surely infecting the U.S. economy.
“With a serious growth recession underway in China , a technical recession looming in Japan, stalled growth in Europe and full-blown recessions in Russia , Brazil and many emerging market nations, the U.S. economy has softened appreciably,” he wrote. “That overseas weakness has been exported to the U.S. and it has been borne out in the latest batch of economic numbers.”
Meanwhile, the International Monetary Fund predicted that China's slowdown and tumbling commodity prices will push global economic growth this year to the lowest level since the recession year 2009,
the AP reported.
The fund says the world economy will grow 3.1 percent this year, down from a July forecast of 3.3 percent and from 3.4 percent growth last year.
"The risks seem more tilted to the downside than they did just a few months ago," IMF chief economist Maurice Obstfeld, told reporters.
Still, Obstfeld downplayed the risk of a global recession.
The Federal Reserve last month cited economic weakness around the world — and especially in China — when it decided to postpone a long-anticipated increase in short-term U.S. interest rates, which it's kept near zero since December 2008.
Obstfeld said any rate increase in the United States would be good news, reflecting the Fed's vote of confidence in the American economy, the world's largest.
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