Keep up policy support intensity to spur economic growth

Four countries have raised the curtains on an interest rate hike with their respective moves. The Reserve Bank of Australia (RBA) raised its benchmark interest rate by a quarter percentage point to 3.5 percent for a second straight month, following an interest rate hike in early October. Earlier, Israel and Norway's central banks also announced their benchmark rate raises and became the first two nations to increase their interest rate since the outbreak of financial crisis in 2008. India's central bank, instead of increasing its interest rate, recently decided to raise the statutory liquidity ratio with an apparent attitude to tighten the monetary policy.

In fact, those nations have taken the lead in pushing up the interest rate, in a bid to comply with changes in their domestic macroeconomic situation. For example, Australia's central bank, or RBA, notes in a quarterly monetary policy statement released on Nov. 6 that it raised its economic growth forecast, adding that the economy will grow stronger than anticipated, and all business confidence indexes were resumed. Underlying inflation fell from 4.2 percent through the year to the March quarter to 3.9 percent through the year to the June quarter, and it was still higher than its target range of 2-3 percent, and economic growth in the coming year is expected to approach the trend level.

Noting that the risks for a severe economic contraction has phased out, ARB said its "gradual withdrawal from the implementation of the economic downturn stimulus monetary policy is very prudent." Norway's central bank raised its key interest rate by a quarter percentage point… was due to a shaper-than-expected rise in inflation and lower employment. "The Norwegian economy has gotten moving again faster tan anticipated," the bank said in its recent interest rate hike statement. It means that a higher inflation rate would keep in a low position, whereas the pace for interest raise could be faster than previously expected.

Both Norway and Australia have recovered rapidly economically in global financial crisis due to their rich natural resources. Norway is a big exporter of petroleum oil and natural gas, and a rapid rise in world fuel prices has contributed directly and immensely to its economic recovery and the sustainable uplift of prices at the same time.

The situation in Australia is very similar. The Asian region's economic rebound has led to a drastic rise in the prices of iron ore, other materials and a bulk of commoditisers. Consequently, this promoted or spurred Australia to a mild recession during the crisis and a quick recovery in the post-crisis days.

Either Israel, Norway or Australia, nevertheless, has a relatively limited proportion of world economy. As for the United States, the European Union (EU), Japan and a few other major economies, however, the road for their economic recovery is more torturous and full of twist and turns.

Although U.S. gross domestic product (GDP) rose at a 3.5 percent annual rate in the third quarter this year, the nation is yet to move out of looming shadows, particularly the specter of deflation. What makes the matter even worse is that the unemployment rate rose by 0.4 percentage points to 10.2 percent in October, the highest in more than 26 years since 1983, according to the US Department of Labor. So, the Federal Reserve did not give the market any "hint" at a latest monetary policy meeting for a likely interest rate raise but underscored its determination to avoid deflation instead.

In Japan's case, the Bank of Japan forecasted two years of deflation. In September, Japan's core consumer price index retreated 2.3 percentage points, its seventh consecutive drop in the month. As for the economy in the euro zone, the situation on the labor market remains stark, and the jobless rate could be on rise, coupled with weak market demand and undefined economic prospects.

To date, there are already signs of warming-up for world economy however, but some real differences still exist in policy choice on the part of different governments. Nevertheless, G20 Finance Ministers and Central Bank Governors held in St. Andrews, Scotland on Nov. 7-8 maintained that nations around the globe should continue to keep up their policy support intensity and upbeat over world economic recovery.

By People's Daily Online and contribut4d by Wan Guangcai