US economy is back to the new normal
- By Zhang Jingwei
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E-mail China.org.cn, October 7, 2014
The financial crisis which began on Wall Street in 2008 triggered a global economic crisis. The United States now seems to remain the Noah's Ark that carries the world's hopes, and the flood of the crisis will only recede when the dove embodied by the U.S. economy brings the prospect of a recovery.
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The U.S. economy is back to the "new normal." [File photo] |
The U.S. Federal Reserve started to scale back on bond buying this year, and the U.S. economy began to recover. Despite severe weather conditions in the first quarter, the U.S. economy still stands out among its peers in China, Europe and Japan. The Fed keeps reducing the purchase of bonds, and quantitative easing is expected to end by October.
This means the U.S. economy is back to the "new normal," but the question of whether U.S. monetary policy will reach a new normal as well is still baffling the world. Even within the Federal Reserve, there is a group of hawks, including Kansas City Fed President Esther George who thinks that the time for raising the interest rate has come, since the job market has improved. But Fed Chairwoman Janet Yellen argues that the Fed needs to maintain low interest rates to tackle the high jobless rate which has gripped the U.S. for a long time.
The normalization of the interest rate is bound to be on the agenda after the withdrawal of quantitative easing. Hawks and doves will eventually form a consensus around increasing the interest rate, though it remains unclear when we should expect such consensus to be reached. Major institutions have predicted that it will come in the middle of next year, given Yellen's leverage on this matter.
Though the economic crisis has changed the global economic landscape, the U.S. is still the most influential actor in the global economy. The introduction and withdrawal of QE and the increasing of interest rates have a great impact on the global economy and related issues. After all, the U.S. and the dollar still have their traditional advantages in the global market, and any change in these advantages will induce a chain reaction. The message that has come out of the Federal Open Market Committee meetings is that the Fed is neither motivated nor pressed to increase interest rates.
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