A rate hike is not a "end of the world"

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A rate hike is not a "end of the world"

During the International Monetary Fund (IMF)-World Bank (WB) annual meeting in October, the former Deputy Governor of the Bank of England, Paul Tucker, accepted an exclusive interview with a special correspondent from Lujiazui magazine, while the IMF also Once again, the global economic growth rate is lowered. Tucker has served in the Bank of England for 33 years and has witnessed the replacement of five Bank of England governors and the changes in UK financial stability regulation. When talking about the supervision of the "post-crisis era", Tucker believes that the current "new British model" is worth learning, and Tucker is one of the designers of the model. In a word, "If you let the central bank do the lender of last resort on the one hand, and do not let the central bank play a regulatory role on the other hand, this is actually asking for trouble." Tucker said, in this line of thought Next, countries should also find a model that suits their national conditions. In the market debate on the Fed’s interest rate hike, the more hawkish Tucker said, “US inflation is very close to the target, and the labor market is close to equilibrium. If zero interest rates are really needed now, then the market must have entered a state of emergency. (emergency), but in the process of communicating with people around me, no one has shown this state." In his opinion, "even if you increase interest rates and then cut interest rates is not a big deal, the end of the world will not It’s coming.” The reason why the market nerves are so tight may be related to the mode of communication with Fed officials.

Lujiazui: Global downside risks accumulate, geopolitical risks rise, how do you view the prospects of the world's major economies? How does the structural reforms highlighted by G20 advance?

Tucker: I am more optimistic about China and the US economy, but I am more worried about Japan and the Eurozone. Like the rest of the world, the UK needs structural reforms, but the specific content of the reforms is different. Therefore, the public should put pressure on policy makers to accelerate the structural reforms.

"Lujiazui": Now that populism is on the rise, and in the context of long-term low growth rate, it seems that we are not allowed to pursue reform at the expense of growth.

Tucker: The United States needs public sector investment, which also requires a very technical design to boost confidence. I think the Fed is very close to raising interest rates, but I think this should be a moment to inspire confidence, because we can finally get out of the unconventional policy response during the crisis. If we can stimulate confidence, we will see investment recovery; China’s situation is still Unlike China, which faces credit problems, delays may be the simplest problem in the world, but this must be the next best thing.

"Lujiazui": According to your point of view, your attitude towards the Fed's interest rate hike is more hawkish?

Tucker: I am indeed a hawk. Inflation is very close to the target, and the labor market is close to equilibrium. If zero interest rates are really needed now, then the market must have entered an emergency, but I did not show one person in the process of communicating with people around me. This state. I think it's a pity that adding a single interest is considered a terrible thing at the moment. In fact, this is not necessary, because all goals are slowly being realized. The probable reason is that the Fed will hold various discussions during the FOMC meeting, and these committee members will discuss these issues through different post-meeting speeches, instead of before the FOMC, it seems to be trying to find a consensus, I think this kind of currency There are some problems in the policy development process. In fact, even if you increase interest rates and then cut interest rates, it is not a big deal. The end of the world will not come.

Lujiazui: What do you think about the spillover effect and spillover effect of the Fed's monetary policy?

Tucker: The Fed must be more aware of the importance of these effects over the past few years. In the past, the Fed believed that "the spillover effect can occur in many places. We don't care. The concept of other countries is very large, and it is much larger than the United States. Of course, there will be a spillover effect and it will not have much impact." Now, India, Brazil, and China’s interest rate hikes are not “end of the world” and they are also cautious because they are still worried about the impact of the Fed.

"Lujiazui": Mohamed El-Erian released a new book - "The Only Model: Central Bank, Unstable, and Avoiding the Next Crash" (The OnlyGame in Town: Central Banks, Instability and Avoiding the Next Collapse). He believes that we have reached the "T-character" (T juncture), if it is not a systemic collapse, it is to find a new path. In your opinion, is he too pessimistic?

Tucker: We are never doomed to be doomed. The biggest mistake is to think that we are doomed to fail. The democratic government in the West is very flexible, time can prove this, and the Chinese government can make decisions with great decisiveness. In the end, politicians will respond, especially at a critical juncture, and in addition, technological change requires us to respond. At the same time, there are many emerging market economies that are still able to guarantee high growth rates and expand global demand growth. India, Indonesia, Brazil, Argentina, etc. are all examples of this. Of course there are many risks, but we are not going nowhere.

Lujiazui: According to history, almost all crises are related to the appreciation of the US dollar and the cross-border flow of capital. In recent years, we can see that capital flows are becoming more intense, so the volatility faced by emerging markets may be more serious than in the past.

Tucker: My main concern is that there may be "reform fatigue". At the same time, the US bank's regulatory model is very good, but there is no proper regulation of shadow banking and no attention to national balance sheets. Earlier, IMF chief economist Olivier Blanchard had proposed to ban certain forms of cross-border capital flows. I think this is too harsh, but countries must ensure that their balance sheets are not problematic. A few years ago, I and some scholars gave the IMF some policy advice, but it is important to make these recommendations.

"Lujiazui": Since the crisis, macro-prudential supervision has received unprecedented attention. China is also considering "super regulation". What advice do you have? Is the "American model" and the "British model" suitable for China?

Tucker: I am one of the designers of the current "British model". Frankly speaking, I also like the current model, but each country has to decide the specific model according to its own situation. The core is that if the central bank is to make the lender of last resort on the one hand, and the central bank is not allowed to play its supervisory function on the other hand, this is actually asking for trouble. In fact, the previous UK's regulatory model was that the Bank of England was completely unsupervised, and I think this is almost the worst regulatory framework. Specifically, the old model of the UK requires departments to coordinate and cooperate rather than cross-sectoral competition. But I know that cooperation is actually very difficult and it has cost the UK a lot. I think that China's ability to have such discussions is actually very beneficial to China.

"Lujiazui": For the Brexit incident, with the expectation of "hard Brexit" warming up, do you think the EU and the UK will be more affected?

Tucker: I think that in the long run, this is not good for both, because geopolitical risks may weaken the euro in 15 to 20 years, and both sides have an impact. In the short term, because there is still a lot of uncertainty in the Brexit negotiations, who knows what will happen.

Enter [Sina Finance and Economics Unit] Discussion