31 August, AtoZForex.com, Lagos – The Jackson Hole symposium held last week saw Central bankers around the world confidently declare to their US counterparts that they see no reason for further delay in decision making by the Federal reserve, as they are ready for the hike in U.S interest rate.
The policymakers at the Global banking conference in Jackson Hole declared both publicly and in private that the Fed has telegraphed an initial monetary tightening, and following a year-long rise in the dollar, financial markets all over the world are well braced up for the impending rate hikes.
Left to the top central banker in Mexico, Augustin Carstens, a rate hike by the US is a reassuring sign of economic health, even if it eventually demands that the growth-challenged Mexico is to follow suit, by having its rate raised within the space of few days. Augustin Carstens said in an interview, “if the Fed tightens, it will be due to the fact that they have a perception that inflation is drifting up, but a more important that unemployment is falling and the economy is recovering”.
The head of the Peoples Bank of China Research institute of Finance and Banking, Yao Yudong has accused the Fed for upheavals in the market. He is of the opinion that there should be a delay in the U.S rate hike. However, majority of the central bankers shares the same view as that of Carsten’s.
For the first time in six years, U.S potential hike in rates will lead to painful readjustments as countries may be faced with competing with a stronger dollar. Countries such as Chile and Switzerland felt the effect of Fed’s easy money. Chile’s Annual inflation rate for instance has consistently come in above the banks target range of 2% and 4%. While in Switzerland, the central bank has been obliged to keep rates negative after it removed its cap on the Franc at 1.20 to the euro.
The International monetary fund (IMF) and People’s Bank of China are against the US rate hikes at the moment, vying for a delay till the strength in the economy seems more obvious and solid.
“It has to happen sometime- everybody knows it has to happen- but pick your time”, said Reserve Bank of India Governor, Raghuram Rajan.