15 April 2010Fed's Bernanke cautions on impact of yuan move
WASHINGTON: The Federal Reserve's Ben Bernanke on Wednesday became the latest US leader to press China to revalue its currency but cautioned lawmakers any such move would have little short-term impact.
Speaking to a Congressional panel the Fed chairman said it would be "good for the Chinese to allow more flexibility in their exchange rate," giving Beijing more levers to tackle economic problems.
US lawmakers, facing election-year pressure, have threatened sanctions against China, saying action to keep the yuan artificially low against the dollar had resulted in a ballooning US trade deficit and a loss of American jobs.
"Most economists agree their currency is undervalued and has been used to have a more export-oriented economy, Bernanke agreed, adding it would help China deal with inflation.
But, he indicated, the move would not be enough to address trade imbalances, at least in the short term.
"They would also need to take action such as creating a stronger safety net that would increase consumption and create a more domestic orientation towards spending.
"I don't think the rate by itself in a short term would have a major impact but over time it would have an impact," he said.
Bernanke, who has been Chairman of the Federal Reserve since 2006, is one of only a handful of macroeconomists serving in the Fed's upper echelons.
His comments come a day after President Barack Obama raised the prickly currency subject with Chinese President Hu Jintao on the sidelines of a two-day nuclear security summit in Washington.
Obama said China "rightly sees the issue of currency as a sovereign issue" and was "resistant to international pressure, when it comes to them making decisions about their currency policy and monetary policy."
The US president reminded China that it had to live up to its pledge at a meeting of the Group of 20 industrialised and emerging economies in "making sure that currencies are tracking roughly the market and not giving any one country an advantage over the other."
- AFP/de
