Fed's decision not to cut stimulus 'prudent': Xinhua

Fed's decision not to cut stimulus 'prudent': Xinhua
U.S. Federal Reserve Chairman Ben Bernanke testifies at a U.S. Senate Banking, Housing and Urban Affairs Committee hearing on his nomination to continue as Chairman of the Board of Governors, on Capitol Hill in Washington, December 3, 2009.

BEIJING - The US Federal Reserve's decision to delay reducing its massive monetary stimulus appears prudent, China's Xinhua news agency said on Thursday.

"The Fed's 'no taper yet' decision seems prudent at the moment as the global economic outlook remains gloomy," the official state-run agency said in an English-language commentary.

"However, while the unconventional monetary measure may be effective in boosting market confidence in the short run, the flip side is also evident," it added.

The news agency said a disorderly tapering "could trigger worldwide market turbulence, causing negative spillover effects such as increasing volatility in cross-border capital flows, the global currency market, asset prices and bulk commodity prices," Xinhua said.

The US should remain "sober-headed" in making decisions about quantitative easing (QE) and always keep an eye on medium- and long-term risks, it added.

"The QE may have helped the US to reduce the impact of the latest financial crisis and contributed to sustaining the economic recovery, but clearly, it is no panacea," Xinhua said.

"It is the hope of the emerging markets that the US and other advanced economies could step up coordination and communication with the rest of the world on the timing and steps of the so-called tapering, so that the markets could have reasonable expectations," the agency said.

Commentaries on Xinhua can be read as a reflection of Chinese government thinking, though they do not amount to official policy statements.

 

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