Word: interestion
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During the dark days of the global credit crunch a year ago, policymakers around the world had a generally easy time coordinating decisions. As asset prices tanked, lending dried up and growth shriveled, governments and central banks were forced to take similar steps - pump up fiscal spending and slash interest rates to support growth and unfreeze financial markets. Now, as an economic recovery emerges, governments are hoping for another coordinated effort to exit from their massive stimulus plans, including near-zero interest rates. That intention was clearly laid out during the September G-20 summit in Pittsburgh, Pa. The leaders...
...That possibility is already becoming a reality, as signs appear that central-bank policies are beginning to diverge. On Oct. 6, Australia became the first G-20 nation to raise interest rates, hiking its key rate by a quarter of a percentage point, to 3.25%. With "inflation close to target and the risk of serious economic contraction in Australia now having passed," Reserve Bank of Australia Governor Glenn Stevens said in a statement, the central bank decided that it was now "prudent to begin gradually lessening the stimulus provided by monetary policy." Meanwhile, in other industrialized nations still suffering from...
...haphazard exit from stimulus measures, with countries going their separate ways, could pose its own set of problems. In this era of globalization what one government does in one corner of the world can have a knock-off effect on economies in another corner. For example, countries that raise interest rates ahead of others could end up attracting money from foreign investors seeking a higher return, potentially draining funds away from economies that are still badly in need of investment. Or if too many governments turn off the stimulus tap too quickly, global demand could fall sharply. "An unruly rush...
...economist at Deutsche Bank in Hong Kong, in a September note. Concerns are also mounting that continued loose monetary policy in Asia could fuel dangerous and unstable asset price bubbles, especially in property. There has been some speculation in financial markets that South Korea's central bank could raise interest rates in the coming months to cool a roaring housing market. Frederic Neumann, an economist at HSBC in Hong Kong, says Asian central bankers might need to hike rates by four percentage points over the next year - much more than is expected from the Fed - in order to quash inflation...
...options are the same as those open to President Bush, who took a strong personal interest in the issue. Progress is to be evaluated every three months. If significant progress isn't evident, then the President will face a series of tough decisions on what to do with a regime bent on slaughtering its own people. The fear is that wrangling among policymakers might lead another young American President to sit idle as another African country spirals out of control...