In a blunt call for certain emerging economies to allow their
currencies to rise, he also said that foreign exchange intervention encouraged
destabilizing inflows of foreign capital, but he did not specify China by name.
"The perceived advantages of undervaluation and the problem
of unwanted capital inflows must be understood as a package - you can't have
one without the other," Bernanke said in Tokyo.
Bernanke has often defended Fed actions against domestic critics,
who argue the policy of keeping interest rates near zero while ramping up asset
purchases hurts savers and risks future inflation. But in the Tokyo speech, Bernanke addressed
critics abroad, saying stronger growth in the United States bolsters global
prospects as well, countering the likes of Brazil's Finance Minister Guido
Mantega who has labeled the Fed's latest stimulus effort "selfish".
Critics say the Fed's unorthodox policies weaken the U.S. dollar
and boost the currencies of developing countries, hurting their ability to
export. "It is not at all clear
that accommodative policies in advanced economies impose net costs on emerging
market economies," Bernanke said at an event sponsored by the Bank of
Japan and the International Monetary Fund. While the speech was delivered in private,
the Fed provided a text to the media.
Restating a theme that he has addressed in the past, the Fed chief
also said that if emerging economies stopped intervening and allowed their
currencies to rise, this would help insulate their financial systems from external
pressure. "Under a flexible
exchange-rate regime, a fully independent monetary policy, together with fiscal
policy as needed, would be available to help counteract any adverse effects of
currency appreciation on growth," Bernanke said.
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