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.
BACK IN THE NEIGHBORHOOD: The planned transit by the ‘Baden-Wuerttemberg’ and the ‘Frankfurt am Main’ would be the German Navy’s first passage since 2002 Two German warships are set to pass through the Taiwan Strait in the middle of this month, becoming the first German naval vessels to do so in 22 years, Der Spiegel reported on Saturday. Reuters last month reported that the warships, the frigate Baden-Wuerttemberg and the replenishment ship Frankfurt am Main, were awaiting orders from Berlin to sail the Strait, prompting a rebuke to Germany from Beijing. Der Spiegel cited unspecified sources as saying Beijing would not be formally notified of the German ships’ passage to emphasize that Berlin views the trip as normal. The German Federal Ministry of Defense declined to comment. While
‘UPHOLDING PEACE’: Taiwan’s foreign minister thanked the US Congress for using a ‘creative and effective way’ to deter Chinese military aggression toward the nation The US House of Representatives on Monday passed the Taiwan Conflict Deterrence Act, aimed at deterring Chinese aggression toward Taiwan by threatening to publish information about Chinese Communist Party (CCP) officials’ “illicit” financial assets if Beijing were to attack. The act would also “restrict financial services for certain immediate family of such officials,” the text of the legislation says. The bill was introduced in January last year by US representatives French Hill and Brad Sherman. After remarks from several members, it passed unanimously. “If China chooses to attack the free people of Taiwan, [the bill] requires the Treasury secretary to publish the illicit
A senior US military official yesterday warned his Chinese counterpart against Beijing’s “dangerous” moves in the South China Sea during the first talks of their kind between the commanders. Washington and Beijing remain at odds on issues from trade to the status of Taiwan and China’s increasingly assertive approach in disputed maritime regions, but they have sought to re-establish regular military-to-military talks in a bid to prevent flashpoint disputes from spinning out of control. Samuel Paparo, commander of the US Indo-Pacific Command, and Wu Yanan (吳亞男), head of the People’s Liberation Army (PLA) Southern Theater Command, talked via videoconference. Paparo “underscored the importance
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the