The U.S. Federal Reserve's aggressive action to begin $600 billion in quantitative easing (WashPost) received mixed reactions globally. Stocks rose to their highest level in two years Thursday, as investors expressed confidence in its benefit to the economy. But China criticized the move in comments regarding a U.S. proposal to mitigate global imbalances (FT) among G20 countries by imposing current account targets. Cui Tiankai, a deputy foreign minister and one of China's lead negotiators at the G20, said targeting current account surpluses was less important than addressing the United States' quantitative easing move, which could weaken the U.S. dollar and destabilize capital flows into emerging markets. The Brazilian and German governments expressed concern that the Fed's program would stoke a looming "currency war," (FT) while east Asian central banks said they were preparing responsive measures to protect their economies from large capital inflows. Inflationary pressures, meanwhile, prompted India and Australia to raise interest rates (Reuters) this week. The currency tensions undermine U.S. efforts to rally international support for an accord to limit current account balances at the G20 meeting in Seoul next week. The Fed move also deepened domestic fears that the U.S. central bank is stepping into fiscal policy (WSJ), which risks stoking domestic inflation and reckless government spending.
The Fed's move is bad policy, straining the international monetary order and U.S. credibility abroad, writes CFR's Sebastian Mallaby.
In the Daily Telegraph, Jeremy Warner says the demise of the dollar as a global currency reserve is more likely to resolve global imbalances than regulating current account balances, since "dollar hegemony was itself a major cause of both the imbalances and the crisis."
An L.A. Times editorial says although the Fed is failing at one of its core mandates, to keep unemployment low, the real fault lies with Congress, which has not done enough to stimulate the economy.