U.S. Federal Reserve announced the second round of quantitative easing monetary policy, to the end of June 2011 to buy 600 billion U.S. dollars before the long-term U.S. treasury bonds to stimulate the U.S. economic recovery.

In fact, on the quantitative easing policy in the long expected, the slow pace of U.S. economic recovery, unemployment remains high, investors had already been a new round of economic stimulus is full of expectations. Interest rates almost to zero in after the Fed has little room for maneuver, more printing became the inevitable choice. Thus, the dollar remained weak start, the dollar index falling, more liquidity is created, that makes a commodity associated with the U.S. dollar and energy prices. Followed, that is, economic revival, the state must bear the upstream production of imported inflationary pressure on prices.

Thus, the central bank suddenly in October 20 to raise interest rates, it is reflection of the pressure, before the introduction of the policy ahead of the Fed, but also to reduce the external pressure on RMB appreciation. Not difficult to find, and Australia took the lead out of the economic downturn the country has long been of interest rate adjustments (Reserve Bank of Australia on November 2 raised interest rates again), while the domestic central bank inflation expectations are already in the market situation has been “on hold” It shows how much the central bank monetary policy more attention to promoting economic development, seem prudent for the policy change, or too cautious. This is also expected to reduce the parties, until the sudden appearance of such a shock.

The impact is difficult to predict when will this happen again, because we do not have the initiative, the proliferation of global liquidity has become a foregone conclusion, and not yet reached the goal – the expected time of economic recession in Europe and America will be delayed. The economic stimulus package will continue, difficult to stop the flow of hot money, the prices of upstream products is high over the longer term, will lead to continued price increases power. Can say that a few countries and regions alone, it is difficult to solve such a dilemma – the dollar is not strong and is awash with liquidity situation, how to recycle liquidity to control inflation, not to mention China in order to promote the resumption of economic growth and excess increase the money supply too much.

However, from another point of view, the domestic interest rate also has a lot to think twice, because the real estate control is continuing, the high price is not out before the bubble, to continue raising interest rates could increase the credit risk of the property market, while production increased costs into product prices will rise, causing the cycle of rising inflation – so the October rate hike, the central bank’s overall interest rate adjustment is less than deposits. On the other hand, there is always the expected appreciation of the renminbi, raise interest rates will undoubtedly attract more hot money inflows, but also further increase the asset bubbles and inflation risks.

So, the next stage of the inevitable focus of monetary policy is the control of liquidity, although it is difficult, but the recovery of excess liquidity in order to control inflation should aim to is imperative, and lower economic growth while increasing inflation control target limits will help guide the rational inflation expectations, and increase the flexibility of monetary policy space. Recently the central bank will continue to increase the intensity of the open market to return the funds, and reserve the use of tools does not rule out the possibility. The task of controlling inflation is still very arduous, liquidity difficulties must be faced, and the degree of inflation will continue to deteriorate, and will further increase inflation expectations, interest rates will affect the use of tools, because you can sure, monetary policy to solve problems is far from over.

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