Former New Zealand Central Bank Governor said the Fed may fall behind the curve

The former governor of the Reserve Bank of New Zealand told CNBC on Friday that the Fed is likely to fall behind the curve in terms of interest rates.

Donald Brash at CNBC’s “Squawk Box Asia.”

Brash, who served as the governor of the Central Bank of New Zealand from 1988 to 2002, said that the Federal Reserve not only delayed raising interest rates, but was also injecting funds into the economy, and that this situation looks set to continue until next year.

“I am a little worried that they are falling behind the curve,” he said.

After them Meeting in early November, Fed officials stated that the Fed will start to slow down its bond purchases at a rate of $15 billion per month, and will actually end its bond purchase plan in mid-2022. After that, the door for the Fed to start operations will open up the rate of increase.

but, Minutes of the November meeting Pointed out that if prices continue to rise, Fed members are willing to raise interest rates sooner than expected.

Market participants now expect The central bank will discuss at its meeting next month whether it should end its bond purchase program sooner.

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During the coronavirus pandemic at the beginning of last year, the Fed took unprecedented measures to ease policy. It reduced interest rates to zero and formulated a monthly bond purchase plan of $120 billion to support the financial markets and the U.S. economy.

Due to the pandemic, other central banks have begun to call back some of the extraordinary support they provided to their respective economies. E.g, Bank of Korea, this National Bank of Pakistan with Reserve Bank of New Zealand Interest rates have been raised recently. The central bank of New Zealand’s recent rate hike is the second in a few months.

Trade and geopolitics

In an extensive interview, Brash also talked about the continued development of a comprehensive and progressive Trans-Pacific Partnership-a large 11-country trade agreement, including New Zealand, in 2018. Donald Trump Pull the U.S. out of the Trans-Pacific Partnership a year ago.

In recent months, China, the United Kingdom and Taiwan have all applied to join the trade agreement in order to gain greater market access. But analysts say U.S. allies such as Australia, Canada, and Japan may block Beijing’s application because they increasingly see China as a “strategic threat.”

“Well, personally, I want to see as many countries as possible in the CPTPP,” Brash told CNBC, adding that the trade agreement is “better trade than the China-led regional comprehensive economic partnership.” protocol”.

When asked whether the tension between the United States and China will escalate further, Brash said, “This situation has serious risks.”

“China is clearly a rising power,” he said. Brash explained that if China’s per capita income rises to half that of the United States, China’s economy will become even larger, which “obviously” will cause tension.

Under the leadership of former US President Donald Trump, tensions between the two countries have escalated, starting with the imposition of trade and tariffs on goods worth billions of dollars, and expanding to other areas such as technology and geopolitics.

America president Joe Biden And the chairman of China Xi Jinping almost Meet in the closest communication between the leaders of the two countries this month Since Biden took office.

CNBC’s Patti Domm contributed to this report.

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