Normalization Needed To Sustain Current Cycle


    Normalization of monetary policy is necessary to sustain the current cycle of economic growth, says Joseph G. Carson, senior vice-president and director of global economic research at AllianceBernstein. Speaking at its ‘Global Economic Outlook and the Changing Structure of Business Cycles over the Post War Period’ session, he said with forecasts of five per cent growth in the U.S., it makes no sense for the central bank to keep the interest rate at zero. In fact, from a risk management standpoint, increasing the interest rate would provide some measure of flexibility to fight future economic downturns. As well, a modest increase in interest rates won’t kill the cycle, it would make it more sustainable, he said. Overall, he said economists are more optimistic, entering the sixth year of economic expansion which started in 2009. However, until recently leadership in the recovery was coming from emerging markets. Now, the U.S. and Japan are starting to show leadership.