US recovery could be tricky: RBA
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SYDNEY, Feb 22 AAP
February 22 2013, 2:11PM
A booming US economy could become quite disruptive for global markets, the Reserve Bank of Australia (RBA) says.
Since the onset of the global financial crisis (GFC) in 2008, the US Federal Reserve's funds rate has been close to zero.
The US central bank has been left with buying bonds from commercial banks to help promote lending and stimulate the economy because it cannot cut its interest rate any further.
RBA governor Glenn Stevens on Friday told a parliamentary committee that as the US economy started to fully recover it may need to start raising its rate to keep inflation under control.
He said this turnaround historically had been tricky.
"It's very hard to calibrate your tightening when you've been easing," Mr Stevens said in Canberra.
"There are plenty of historical precedents for disruption in global markets when the Fed starts to tighten.
"I can think of a couple of occasions when the Fed changing course - because that's what the US economy needed - was quite disruptive for other countries.
"Those problems will become quite acute because of the length of time that interest rates have been quite low and the extent of the debt they purchased.
"It will have to be managed as best it can when it happens," Mr Stevens said.