Bidding a hard farewell to cheap money
The first rise inUS interest rates in almost a decade has been long overdue. After leading the world economy into seven years of super cheap money, it is urgent that the world’s largest economy assume its duty to blaze a trail out of the dangerous lifestyle of zero interest rates.
The lost two decades of the Japanese economy, once the world’s second largest, have only proved the ineffectiveness of excessively loose monetary policies in tackling fundamental structural problems. If theUnited States can manage to maintain robust growth with normalized interest rates in the coming years, it will give a huge boost to the confidence of policymakers in many other countries who have also resorted to cheap money as economic painkillers.
But if theUS economy fails to cope with a gradual rise in its interest rates strongly enough, other countries may need to not only prepare for increasing uncertainties but also rethink the cost of cheap money.
Rising indebtedness, depressed energy prices and sluggish global growth have made 2015 a year of great anxieties. After the InternationalMonetary Fund cut its global growth forecast to 3.1 percent this year, theUnitedNations last week also cut its forecast for global economic growth in 2015 to 2.4 percent, largely due to lower commodity prices, increased market volatility and slow growth in emerging market economies.
But the most uncertain of all is where the hike inUS interest rates will take not only its own economy but also the global financial and commodities markets.
Some argue that, as a result of the divergence ofUS monetary policy and that of other economies with zero interest rates, a strongUS dollarmay hurtUS exports and slow its overall economic growth.