Bernanke Answered The Question Of RMB Exchange Rate: When China Benefits From It, We Will Suffer.

Beijing time on the morning of July 18th, the Federal Reserve Chairman Bernanke On Wednesday, he attended the hearings of the House Financial Services Committee and issued testimony on monetary policy and the state of the US economy. After answering the questions, Bernanke answered questions from several members. The following is a summary of some questions and answers.

1, for loose monetary policy and asset procurement, Bernanke pointed out: Our intention is to maintain in the predictable future. monetary policy Highly relaxed, this practice is necessary. The reason is that the inflation rate is still under our target, and the unemployment rate is still at a fairly high level. As for asset purchases, I have made it clear that we will respond to data. If the data are stronger than we expected, our actions will be quicker, and at the same time, we will maintain a relaxed interest rate policy. If the data are not very strong, if they fail to meet our expectations of the economic trend, we will postpone the process, or even increase the scale of procurement. "

Bernanke stressed, "so we tend to respond positively to incoming data, including our asset purchases, but equally important, To understand our overall policy, including our interest rate policy, we will maintain a high degree of lax. "

When asked how to withdraw from the current ultra loose monetary policy stance without stimulating inflation, Bernanke said, "it has been said that there may be super inflation at any time, which has existed for a long time, but inflation rate is still 1%. We know how to quit. We know how to do this without inflation. Of course, it is always possible to withdraw too early or too late, and it is not appropriate: whenever it begins to tighten monetary policy, this will happen. We have all the tools we need to execute the exit without any inflation worries. "

When asked about the effects of tightening policies, Bernanke said, " I do not think the Fed can raise interest rates much, because the economy is still weak and the inflation rate is still very low. If we want to tighten monetary policy, the economy will be hit. "

2. Policies on China and Japan and foreign currencies exchange rate problem Bernanke said, "China has been managing its own exchange rate for many years, which is below the real level so as to increase its exports. This is what economists call a zero sum game. Basically, when China benefits from it, we will suffer. "

Bernanke said, " Japan's rules are different. They do not manipulate their own exchange rates. They are not directly trying to set the exchange rate in a specific position. They are implementing strong domestic monetary policy measures to try to break the 15 year deflation situation. One side effect of these measures is that the yen exchange rate has been weakened. " Bernanke concluded, "as time goes on, if Japan really achieves positive inflation, the rise in prices will partly offset the change in exchange rates."

3.  For the 7% unemployment rate, Bernanke said, "7% is not a goal. This is only indicative of the level of improvement we hope to see in the labour market. Therefore, I describe a series of conditions that we hope to be satisfied and will begin to moderate the process of asset procurement projects. "

4, and for the inflation rate, Bernanke thinks, "long-term interest rate is roughly equal to inflation rate plus economic growth rate. The inflation rate we want to see is 2%. From this level, after the financial crisis and other reasons, the real growth rate of the economy is somewhat low, that is to say, there should be a lower equilibrium interest rate.

5, when asked about the communication strategy between the Federal Reserve and the market, Bernanke said, "I still believe that we should do our best to inform the market and the public of our plan, and how we will push forward our monetary policy. We refuse to mention that these problems cause risks of dislocation. Market expectations may differ from the expectations of the Fed's decision Committee. This will also lead to excessive leverage or risk of overexposure of market risk positions, and I believe that these positions are part of the market volatility that we have witnessed. Therefore, I think it is very important for us to do our best to communicate with our plans and ideas. I think the market has begun to understand our information, and volatility has obviously slowed down. "