PBOC and US Fed officials exchange ideas
A top Chinese central banker expressed concern over a possible US Federal Reserve interest rate increase, while his US counterpart assured that the pace of policy normalization is "likely to be gradual".
In an exchange of policy stance, Chen Yulu, vice-governor of People's Bank of China, expressed his worry that a further Fed rate increase, at a time that most economies are cutting rates, might widen the interest rate gap and further strengthen the US dollar.
"As the dollar gets stronger, emerging economies might face mutually reinforcing currency depreciation and capital outflow. Plunging commodity prices might compound their difficulties," Chen said. "In a strong dollar cycle, if emerging economies didn't handle their foreign debt-incurred risks well, it could trigger financial turbulence in certain emerging economies, or even a regional financial crisis."
