Council for Economic Planning and Development (CEPD) Minister Christina Liu (劉憶如) said yesterday that although a new round of quantitative easing measures by the US Federal Reserve may be the only way to rescue global markets, the following inflationary pressures would bring higher risk.
The TAIEX plunged 3.57 percent to close at 7,342.96 yesterday following heavy falls in Europe and on Wall Street overnight.
“The tumble on global stock markets reflects investors’ deepening fears of a double-dip recession,” Liu said.
However, unlike the financial crisis in 2008, it is investors’ lack of confidence in the US government rather than their lack of confidence in the market itself that has hit markets, Liu said.
This makes it more difficult for the US government to help to stabilize markets by using fiscal policies, Liu said.
Even if quantitative easing in the US could rescue global markets by stabilizing the US stock market, the measure would further raise inflationary pressures, the other problem facing the global economy, Liu said last week.
Since inflation in the US and Europe is not as low as in 2008, Liu said rising prices of raw materials and crude oil caused by quantitative easing measures could bring more pressure to bear, especially in emerging markets.
“Looking at the risk in Western countries in the second half of the year, we have to realize they need more time to get back on track and we need to see what solution the US comes up with,” Liu said.