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China central bank researcher urges Fed to stop guessing games

Friday, September 18, 2015 - 17:41
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The Federal Reserve should stop forcing global markets to play guessing games on its next interest-rate move, a Chinese central bank researcher was quoted by the official news agency, China News, as saying on Friday.

[BEIJING] The Federal Reserve should stop forcing global markets to play guessing games on its next interest-rate move, a Chinese central bank researcher was quoted by the official news agency, China News, as saying on Friday.

The US central bank should adopt a new Evans Rule to set clear pre-determined economic thresholds for interest-rate moves, Yao Yudong, the head of the finance research institute of the People's Bank of China, was quoted by the news agency as saying, referring to an past proposal by Federal Reserve Bank of Chicago President Charles Evans.

"The central bank should be more responsible in guiding market expectations," Mr Yao was quoted as saying. He said the Fed should not raise until inflation quickens to 2.5 per cent or the unemployment rate falls to 4.5 per cent.

In December 2012, the FOMC adopted Evans' proposal to keep rates near zero as long as unemployment remains above 6.5 per cent, inflation is no more than 2.5 per cent and long-term inflation expectations are well anchored. The Fed kept interest rates near zero on Thursday and hasn't lifted them from that level since December 2008.

While Fed Chair Janet Yellen cited concerns over China among reasons for the decision to hold, Mr Yao said China shouldn't be a concern for US policy making. China's government debt level is low and the country has "no problem" in providing sufficient liquidity, he said, according to the report.

BLOOMBERG