Powell doctrine

Powell doctrine

News:

1. US central bank chairmen in favor increasing interest rate gradually.

Important Facts:

2. According to recent data, the US economy is growing at a strong pace.

3. Unemployment figure touching 20 year low and inflation is close to target of 2 %.

4. Central Bank chief has supported the gradually increase in interest rate is appropriate.

5. President Trump raises concern over increasing interest rate which may have negative impact of economic growth.

6. Another perspective involve criticism that gradually increase in interest rate is too slow.

7. In response to this, Federal bank chief said raising interest rate either too fast or slow involve risk in an economy.

8. He has acknowledged issues with emerging market which could lead to federal policy change in future as well.

9. Federal tightening policy (increasing interest rate) has impacted on several emerging economies negatively.

10. For example, currency depreciation in Turkey and Brazil.

11. India too has raised interest rate twice to avoid currency depreciation.

12. It has been seen in past, The US central bank policy does not address the concern of emerging economies.

13. Change in the US federal policy can have a significant impact on rest of the world.