Zeti Urges Nations To Be Prepared To Face Easing Of US Stimulus Programme

KUALA LUMPUR, June 14 (Bernama) -- Countries have to position themselves to better absorb the volatility generated by the tapering off of US quantitative easing exercise, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said.

Source from (Bernama): http://www.bernama.com/bernama/v7/bu/newsbusiness.php?id=956102
Published: Jun 16, 2013

She said the financial markets would converge towards a more stable condition as the global economy recovered.

"Any such volatility is therefore envisaged to be temporary," she told reporters here Friday.

The market turned cautious in recent weeks due to persistent speculation about the US Federal Reserve withdrawing its stimulus programme.

"Any tapering off would occur because there is recovery in their economy. It is known that this would eventually happen one day.

"In fact, the monetary easing policy of having rates too low for too long has other risks associated with it.

"What is important is that this should be undertaken in a very orderly manner without disrupting in a major way the international financial markets," said Zeti.

On the concerns over the narrowing balance of payments, current account surplus, Zeti said, the major economies, including the US and Japan, were stabilising, export growth were expected to recover.

"In any event, what is important to recognise is for many years that we had a very significant surplus.

"We have been able to build up our reserves which are now in very strong position of over US$140 billion equivalent and these are important in supporting our external position," she said.

Zeti said the country would also benefit from the better investment climate and the improved cost of doing business, and that Malaysia continued to receive a steady inflow of foreign direct investment.

"This is the longer term inflows that could finance, in the event that we have a current account deficit. Therefore it does not represent a concern," she said.

On currency volatility, Zeti said, the financial market players had to be prepared in order to be able to absorb the volatility in the current environment.

"Our mandate is maintaining orderly foreign exchange market conditions. While we see depreciation now but over time the medium term what is important is that it reflects our underlying fundamentals which continues to remain positive," she said.

-- BERNAMA