By MARTIN CRUTSINGER
WASHINGTON (AP) â¿¿ Chairman Ben Bernanke said Monday that the Federal Reserve's low-interest-rate policies are helping to boost growth around the world, rejecting criticism that they could lead to a global currency war.
In a speech at the London School of Economics, Bernanke staunchly defended the Fed's policies and similar stimulus efforts pursued by other central banks since the 2008 financial crisis.
Last week, the Fed stood by its policies to keep borrowing costs at record lows, saying the U.S. economy still required the support to help lower high unemployment.Critics have argued that the low-interest-rate policies could lower a country's currency value and make its products more competitive on global markets. Some have blamed such policies for making the Great Depression worse during the 1930s. Countries devalued their currencies and raised tariffs, which made foreign-made goods more expensive and stunted trade. They became known as "beggar-thy-neighbor" policies. Bernanke argued that the situation is different today because the low-interest rate policies have the primary aim of boosting domestic growth, not trying to lower the value of a nation's currency. "Because stronger growth in each economy confers beneficial spillovers to trading policies, these policies are not 'beggar-thy-neighbor' but rather ... 'enrich-thy-neighbor' actions," Bernanke said. The current efforts should support stronger trade flows, Bernanke said. By boosting growth in major economies, consumers can buy more imported goods from developing countries. In addition to concerns about currency wars, critics have also said that the policies adopted by the Fed and other central banks could increase the risk of inflation and destabilize financial markets. Panelist Axel Weber, a former president of Germany's central bank and now chairman of the board of Swiss bank UBS, spoke to those concerns. He said central banks will be pressed to develop policies that wind down their stimulus without triggering "even bigger problems."