Earlier this week the Singaporean Finance minister called on the Fed to expand its mandate – potential Fed monetary actions could continue to have a financially unstable effect especially amongst the emerging markets.
During the month of August a trading priority was the liquidation of EM assets. India bore the brunt of rapid capital flight exiting their system and seeking solace mostly in the dollar and dollar assets. The emerging world is doomed to capital-flow instability “unless the Fed takes into account financial volatility in high-growth regions in its monetary policy.”
The Fed cannot be act alone – Christian Lagarde and the IMF needs to provide greater guidance on capital controls. Responsibility also lies with Asian policymakers to introduce their own market reforms. This past summers EM asset sell-off has renewed the debate about how to stabilize emerging financial systems. If they don’t then Australasia “faces a perpetual cycle of credit booms and busts unless the US Federal Reserve looks beyond its employment-inflation mandate and considers the impact of its monetary stance on emerging markets,” according to Singapore’s Tharman Shanmugaratnam.
It’s a fine balancing act that the Fed has to deal with. They have never been here before, and turning off the liquidity tap too soon will only stifle what little growth policy makers have worked so hard to achieve – and potentially drag the emerging economies with them.
- Shinzo Abe Likely to Approve Tax Hike
- India Housing Market Could Be Headed For Correction
- Energy and Weak Yen Boost Inflation in Japan
- Chinese Factory Activity Forecast Shows 17 Month High
- PM Abe Confident Japan’s Economy to Drive Global Recovery
- India’s Rupee up 6.1% in September on Inflow Optimism
- Indonesia needs to Prepare for Fed Taper
- India Regulators Want Greater Foreign Access To Rupee Bonds
- Singapore IPO Activity Second Only to US
- China Denies US Style Subprime Crisis Looming
- Indonesia Prepares Defense for Fed Tapering
- Abenomics Benefiting Other Asian Countries More Than Japan
- Changed Expectations after RBI’s Surprise Move
- BOJ’s Efforts are Hurting Australia
- RBI to ensure Adequate Liquidity
- RBNZ Ready to Lift Rates in 2014
- Chinese Growth May Only Be At 4% Instead Of Official 7.5%
- Japan Aging Population To Drain Budget Even With Sales Tax Hike
- Japan’s Ruling Party Bring $3 Billion Tax Cut Proposal
- US and Japan Could Introduce a Joint Drug Patent Proposal to TPP
- Japan Offers 75 Percent Tariff Elimination For TPP
- Chinese PMI Data May Point to Turnaround
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