The Fed Can Do No Good

Blaming of Federal Reserve for the recent decline in emerging-market currencies shows the agency will face global criticism, whatever its policy.

Janet Yellen is discovering that when it comes to providing monetary stimulus, the Federal Reserve is damned by emerging markets when it does and damned when it doesn’t.

Sixteen months after she used a Tokyo gathering of global policy makers to defend her institution against criticism it was purchasing too many assets, Fed Chair Yellen attends this week’s Group of 20 meeting in Sydney being lobbied to pay greater attention to foreign fallout as the U.S. slows its bond-buying.

While Fed policy makers didn’t mention emerging markets in their last policy statement, officials agreed the unfolding events in emerging markets “needed to be watched carefully,” minutes of their January meeting released yesterday show.

“Recent volatility in emerging markets appeared to have had only a limited effect to date on U.S. financial markets,” according to the record of the gathering. “It was also noted that recent developments in several emerging market economies, if they continued, could pose downside risks to the outlook.”

European Central Bank President Mario Draghi reinforced the idea that it is up to each institution to keep its house in order. “The priority for all of us is the compliance with our mandate,” he said on Feb. 6 in Frankfurt.

The following week, Australian Treasurer Joe Hockey said the world “can no longer rely on methadone every day” from easy U.S. monetary policy and that central banks must act in their national interests.

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