There are few entertaining economists, and fewer still work on Wall Street. Willem Buiter, the chief economist of Citigroup, is one of them. He is not only entertaining, but also outspoken—and his analysis of key economic trends and themes is second to none.
The Epoch Times spoke with Buiter about Federal Reserve (Fed) interest rate policy and the surprising strength of the euro, as well as the impossibility of a Chinese soft landing.
The Epoch Times: What is the Fed up to?
Willem Buiter: Well, there is very little tightening. The Fed has been raising its policy rates, unlike most of the central banks, who’ve been keeping them constant or are still cutting. But in real terms, policy rates are no higher now than they were before—maybe slightly less expansionary than they were, but there’s very little restraint.
You have the anticipation of balance sheet shrinking being announced probably in September. But that itself is not a major issue for markets in the most liquid assets in the universe.
Long-term rates are low, the stock market is booming, the currency is relatively weak, and policy rates are edging up in nominal terms very, very slowly. We'll see one more rate hike, probably at the end of the year. So that is technically tightening relative to a situation we didn’t have, but there is very little absolute monetary tightness. Financial conditions and monetary policy continue to be very supportive of economic activity in the United States.
Most of the commentators have never seen a rate increase before. The last time the Fed started hiking was nine years ago, so any rate hike looks dramatic, when in fact it is very little on top of almost nothing.
