Federal Reserve Governor Jerome Powell on Friday said export-oriented Asian economies should respond to the sharp slowdown in global trade in the last few years by boosting demand for goods and services within their own borders.
Doing so, Powell said, would not only help bolster growth in Asian economies hurt by slowing demand for their goods from other countries, but would also lift the world economy.
Emerging Asian economies generally run large trade surpluses, leaving them vulnerable to the vagaries of international demand. World imports have grown at less than 3.5 percent annually since 2011, about half the pace seen in the eight years prior to the financial crisis.
“Encouraging domestic demand and allowing for downward adjustment of these surpluses in emerging Asia, with more balances turning into deficits, would provide a much-needed injection of demand into the global economy,” Powell said in remarks prepared for delivery to the San Francisco Fed’s Center for Pacific Basic Studies annual conference. Though doing so may take time, he said, it would “also support economic growth in the region by providing another source of growth in place of the lessened impetus from external demand.”
Powell, who has a permanent vote on the Fed’s monetary policy-setting panel, did not comment on the U.S. economy or monetary policy beyond noting that “as U.S. monetary policy normalizes” emerging Asian economies are less vulnerable than they used to be because they have built war chests of reserves and their currencies are more flexible.
The Fed is expected to U.S. interest raise rates when policymakers meet next month.
Source: Reuters (Reporting by Ann Saphir; editing by Diane Craft)