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Federal Reserve chief hits out at China


Federal Reserve chief hits out at China


The US Federal Reserve’s plan to buy 600 billion dollars worth of government bonds has come under the spotlight in Frankfurt. The Fed’s chairman, Ben Bernanke, hit back at opponents, including China and Brazil, who are accusing him of weakening the dollar. Bernanke says the move will actually help the world’s economy.

He also levelled thinly-veiled criticism at China for keeping its currency weak. Speaking at the conference in Frankfurt Bernanke said:

“Surplus countries could speed adjustment with policies that boost domestic spending, such as strengthening social safety nets, improving weaker credit markets to encourage domestic consumption, or other structural reforms.”

Usually the Federal Reserve and Central Bank are on opposing sides when it comes to monetary policy. However, on this occasion, ECB president, Jean-Claude Trichet, supported Bernanke’s comments, saying if the global imbalances are not corrected, there would be major difficulties in the future.

Dominique Strauss-Kahn also highlighted the tensions between the dollar and Chinese yuan. The IMF head said he did not think it was possible to solve the imbalance problems without changes to relative values of foreign currencies. He acknowledged the wider effects of US economic growth, saying the consequences for the rest of the world would be ‘huge’.

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