The 2024 Bund Summit in Shanghai, one of the Chinese mainland’s most significant financial gatherings, concluded on Saturday. Former central bank officials from the United States, Japan, and Europe convened at the summit to share their perspectives on current monetary policies amid an uncertain global economic outlook.
United States: A Shift Toward Easing
Donald Kohn, former vice-chairman of the U.S. Federal Reserve, indicated that the Federal Reserve is poised to shift its monetary policy from a period of restriction to one of easing, aligning with movements by other central banks. Kohn noted that while inflation in the U.S. has significantly decreased over the past few years, it has yet to reach the Fed’s target of two percent. He also highlighted that labor markets have rebalanced substantially, moving away from the extremely tight conditions observed between 2021 and 2022.
Europe: Inflation Control Efforts Continue
Jean-Claude Trichet, former president of the European Central Bank (ECB), discussed the ECB’s efforts to control inflation, mentioning that the institution has raised interest rates ten times, with the U.S. increasing rates eleven times. Trichet pointed out that the ECB decreased rates by 25 basis points in June, resulting in a decline in inflation to 2.5 percent. However, he expressed concern that core inflation remains elevated at 2.8 percent, above the ECB’s target of two percent, and is not decreasing as rapidly as anticipated.
Japan: Normalizing Monetary Policy
Kuroda Haruhiko, former governor of the Bank of Japan, emphasized that Japan’s inflation dynamics differ from those of the U.S. and Europe. He recounted Japan’s 15-year deflation period from 1998 through 2012, after which the Bank of Japan set a two percent inflation target in 2013 and introduced Quantitative and Qualitative Monetary Easing policies. Despite overcoming deflation, Japan’s inflation rate fluctuated around one percent without significant wage increases. The situation changed dramatically following the Ukraine conflict in 2022, leading to rising commodity prices and a depreciating Japanese Yen. In 2023, consumer price inflation in Japan reached three percent.
Haruhiko stated that in response, the Bank of Japan decided to normalize monetary policy, raising the short-term policy rate from negative 0.1 percent to positive 0.1 percent. He added that the bank plans to continue this normalization process by gradually increasing the policy rate toward the neutral rate, estimated between one percent and two percent, which remains significantly lower than the target.
The insights shared by these former central bank leaders highlight the diverse challenges and strategies faced by economies worldwide in navigating monetary policy amid uncertain economic conditions.
Reference(s):
cgtn.com
