viernes, 28 de agosto de 2015

viernes, agosto 28, 2015

Overseas Bankers, Officials Urge Fed Not to Waver on Interest-Rate Rise

Some international officials have a message for the U.S. central bank: Get on with it already

By Jon Hilsenrath 

Updated Aug. 27, 2015 6:11 p.m. ET

Jacob Frenkel, chairman of J.P. Morgan Chase International and former head of the Bank of Israel, said market drama would be increased by a delay.Jacob Frenkel, chairman of J.P. Morgan Chase International and former head of the Bank of Israel, said market drama would be increased by a delay. Photo: Andrey Rudakov/Bloomberg News        


JACKSON HOLE, Wyo.—After months of forewarning by Federal Reserve officials that they are preparing to raise short-term interest rates, some international officials attending the Fed’s annual retreat here this week have a message: Get on with it already.

Fed policy makers are wavering on whether to move rates up in September. Volatile stock prices, falling commodities, a strong dollar and signs of a deepening economic slowdown in China have created doubts at the U.S. central bank about the outlook for global growth.

But international officials have been saying for several months they will be prepared when the Fed moves rates higher, a message that is being echoed as central bankers, academics, journalists and others converge now in Jackson Hole for the Federal Reserve Bank of Kansas City’s annual symposium.

“If you delay something that you were planning to do, then you leave the impression that your compass is different than what you led markets to believe,” Jacob Frenkel, chairman of J.P. Morgan Chase JPM 2.50 % International and former head of the Bank of Israel, said in an interview Thursday. Market drama is increased by delay, he added.

Fed officials have said they plan to raise their benchmark short-term interest rate from near zero this year, but haven’t agreed on when to start. The Fed’s Sept. 16-17 policy meeting was shaping up as a close call for a decision to move, and then market turmoil caused some officials to waver. New York Fed President William Dudley said Wednesday that a rate increase in September had become “less compelling.”

Some observers say they will be relieved when the Fed finally acts.

“It’s better for the U.S. to make a decision,” Bambang Brodjonegoro, Indonesia’s finance minister, said Wednesday in an interview in Jakarta. “What makes the financial markets volatile is the uncertainty.”

Raising rates would signal that the Fed is confident about the U.S. economy, Bank of Japan Governor Haruhiko Kuroda said late Wednesday in New York, ahead of the Fed gathering.

“That is not only good for the U.S. economy, but also for the world economy, including the Japanese economy,” he said.

The Fed lowered short-term rates to near zero in December 2008 and has held them there since to bolster the economy through the financial crisis, recession and uneven recovery. Recent economic reports suggest the U.S. economy is now on a firm footing, even though the outlook has become more uncertain because of developments in financial markets and overseas.

A rate increase by the central bank of the world’s largest economy would reverberate around the world and could accelerate some trends already worrying the Fed, such as the rise of the dollar. A stronger dollar puts downward pressure on U.S. exports and holds down imported inflation at a time when the Fed is trying to push inflation up from below 2%.

A Fed move also would shift the outlook for emerging markets, raising a risk of currency depreciation and capital outflows that could destabilize their economies.

It could create problems for countries and companies overseas that have turned to international debt markets to fund growth in recent years. The Institute for International Finance, in a June report, identified China, Turkey, Brazil, Russia and Indonesia as countries with high levels of corporate debt and other countries, including Mexico, with sizable U.S. dollar exposures. A stronger dollar could make those debts harder to repay.

Some central bankers would welcome a U.S. rate increase because it could confer benefits on their economies.

When interest rates rise in one country but not another, the currency tends to rise in the country where rates rise because the country with higher rates offers higher returns on bank deposits and fixed-income investments.

U.S. counterparts will experience both advantages and disadvantages if their currencies behave according to textbooks and their currencies weaken against the dollar if the Fed raises rates.

The advantage is their weaker currency supports their exports. The disadvantage is it becomes more expensive to borrow in dollars and causes some upward pressure on inflation.

A number of countries, hurting because of slowing global growth, are rooting for the export advantage and to relieve downward pressure on domestic inflation. New Zealand is one example.

New Zealand central bank Governor Graeme Wheeler, who has expressed a desire to see his country’s currency depreciate, said in a speech in late July that “we are likely to see the Federal Reserve and the Bank of England begin the process of normalizing their interest rates, and this may assist the [New Zealand] currency lower.”

Some observers say the Fed’s repeated forewarnings have sunk in with investors and financial institutions by now, diminishing the risk of a shock when the U.S. central bank does act.

“I can’t imagine there would be that many people who would wake up that morning and say, ‘Wow I didn’t see this coming,” said Timothy Adams, president of the Institute for International Finance, a Washington-based group representing banks with global footprints, central banks and other financial institutions.

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