It may be too early for central banks to start detailing strategies to unwind unprecedented policies to boost the economy, Mexican Central Bank Governor Guillermo Ortiz said on Saturday. In an interview on the sidelines of the annual meeting of central bank governors at the Bank for International Settlements (BIS), he said the global economic downturn was past its worst but recovery is not yet secured.
“It may be premature to go into a lot of details about exit strategies at this point, it’s important to have that subject in mind but I think that we are not out of the woods yet,” said Ortiz, who is also chairman of the BIS board.
“One important question is whether these green shoots actually take root and the incipient recovery which we see in some parts of the world is sustainable,” he said.
Central bankers from around the world are gathering this weekend at the BIS headquarters in Switzerland, where hot topics include the improving outlook and the need for the authorities to unwind huge support for the economy and the financial system.
Ortiz said safety nets for the financial sector could not be permanent, urging active dialogue among G20 countries on their removal.
“This will be a central thing at the G20, to try to if not coordinate, at least be very much in contact on the rollback of safety nets ... and also extraordinary measures to support the financial system,” he said.
Central banks, for their part, had to be careful on the timing of their exit from a period of low interest rates and generous liquidity supply.
“Eventually they will have to be rolled back, it’s important not to do it prematurely but also not to take too long — the question of timing is of the essence,” he said.
A pick-up in commodity prices had eased the risk of deflation in all but a few developed countries, but was also threatening to tie the hands of emerging market central banks because of its implication on inflation.
“What is worrying is that the rising commodity prices may put some emerging markets again in a situation where the degree of freedom in terms of monetary policy is constrained,” he said.
Ortiz said though the collapse in economic growth was synchronized globally, the recovery appeared to be uneven with emerging markets picking up more quickly.
In many emerging economies, an improvement was already showing up in the second quarter but final demand remained weak in the US, Europe and Japan.
“The performance of emerging markets, particularly in Asia, has been stronger than anticipated and that is also true in some emerging markets in Latin America,” he said.
“In my view the recovery in the world economy will only be sustainable if final demand — consumption, investment and so on — can be sustained in the major economies. It would be difficult to think in the absence of such a recovery in final demand, that emerging markets by themselves could sustain a recovery,” he said.
A Chinese freighter that allegedly snapped an undersea cable linking Taiwan proper to Penghu County is suspected of being owned by a Chinese state-run company and had docked at the ports of Kaohsiung and Keelung for three months using different names. On Tuesday last week, the Togo-flagged freighter Hong Tai 58 (宏泰58號) and its Chinese crew were detained after the Taipei-Penghu No. 3 submarine cable was severed. When the Coast Guard Administration (CGA) first attempted to detain the ship on grounds of possible sabotage, its crew said the ship’s name was Hong Tai 168, although the Automatic Identification System (AIS)
An Akizuki-class destroyer last month made the first-ever solo transit of a Japan Maritime Self-Defense Force ship through the Taiwan Strait, Japanese government officials with knowledge of the matter said yesterday. The JS Akizuki carried out a north-to-south transit through the Taiwan Strait on Feb. 5 as it sailed to the South China Sea to participate in a joint exercise with US, Australian and Philippine forces that day. The Japanese destroyer JS Sazanami in September last year made the Japan Maritime Self-Defense Force’s first-ever transit through the Taiwan Strait, but it was joined by vessels from New Zealand and Australia,
CHANGE OF MIND: The Chinese crew at first showed a willingness to cooperate, but later regretted that when the ship arrived at the port and refused to enter Togolese Republic-registered Chinese freighter Hong Tai (宏泰號) and its crew have been detained on suspicion of deliberately damaging a submarine cable connecting Taiwan proper and Penghu County, the Coast Guard Administration said in a statement yesterday. The case would be subject to a “national security-level investigation” by the Tainan District Prosecutors’ Office, it added. The administration said that it had been monitoring the ship since 7:10pm on Saturday when it appeared to be loitering in waters about 6 nautical miles (11km) northwest of Tainan’s Chiang Chun Fishing Port, adding that the ship’s location was about 0.5 nautical miles north of the No.
SECURITY: The purpose for giving Hong Kong and Macau residents more lenient paths to permanent residency no longer applies due to China’s policies, a source said The government is considering removing an optional path to citizenship for residents from Hong Kong and Macau, and lengthening the terms for permanent residence eligibility, a source said yesterday. In a bid to prevent the Chinese Communist Party (CCP) from infiltrating Taiwan through immigration from Hong Kong and Macau, the government could amend immigration laws for residents of the territories who currently receive preferential treatment, an official familiar with the matter speaking on condition of anonymity said. The move was part of “national security-related legislative reform,” they added. Under the amendments, arrivals from the Chinese territories would have to reside in Taiwan for
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