Bernanke defends QE as China restricts monetary stimulus

The Federal Reserve's quantitative easing often attracts criticism in the United States but Sunday saw him defending it to an international audience. From Bloomberg:

Federal Reserve Chairman Ben S. Bernanke tried to refute arguments the U.S. central bank’s record stimulus is causing destabilizing flows of capital to emerging-market economies.

“It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,” Bernanke said today in prepared remarks for a seminar in Tokyo on the last day of International Monetary Fund annual meetings.

His comments contrasted with those of IMF Managing Director Christine Lagarde, who told the same audience that such easing is likely to cause large and volatile flows that risk leading to “overheating, asset-price bubbles and the build-up of financial imbalances” in emerging economies, even as she applauded Fed efforts to boost growth...

Brazilian Finance Minister Guido Mantega vowed in a statement delivered at the IMF’s annual meeting to do whatever is necessary to stop the “selfish” monetary policies of some developed nations from hurting his country’s economy...

Philippine central bank Governor Amando Tetangco said in an interview in Tokyo last week that he is “watchful” of the challenges to monetary policy in emerging markets presented by the Fed’s actions. China also expressed concern at the possible side-effects of quantitative easing.

Meanwhile, China may not be as eager to ease monetary policy. While a report today showed that China's inflation rate slowed to 1.9 percent in September from 2.0 percent in August, other reports over the weekend showed that the economy is not falling off a cliff. From Bloomberg:

China’s exports and money supply grew more than estimated in September, signaling that the world’s second-biggest economy may be stabilizing after a slowdown that began in the first quarter of 2011.

Overseas shipments increased 9.9 percent from a year earlier, the customs administration said Oct. 13 in Beijing. That was more than the 5.5 percent median estimate in a Bloomberg News survey of economists. M2 money supply gained 14.8 percent, the fastest pace since June 2011, a central bank report showed the same day.

Indeed, China's central bank appears to remain wary of asset and consumer price inflation.

... At an International Monetary Fund meeting in Tokyo yesterday, central bank official Yi Gang said that bubble risks remain in housing markets in major cities and stimulus will be restricted to an “appropriate” level...

Yi said yesterday that while this year’s inflation rate is “fine” and may be 2.7 percent for the full year, longer-term threats are from agricultural costs and prices for imported raw materials, commodities and energy, which can be driven up by global monetary easing.