U.S. Federal Reserve Chairman Ben Bernanke said a little currency appreciation in the developing world is not a bad thing.
Speaking at the International Monetary Fund meeting in Tokyo this weekend, Bernanke urged Third World nations to allow their currency to appreciate as a means of actually preventing inflation.
"The perceived benefits of currency management inevitably come with costs, including reduced monetary independence and the consequent susceptibility to imported inflation," Bernanke said.
The Wall Street Journal said the Fed has been criticized by other nations for its easy money policy, which they claim causes some investors to plow funds into developing nations. The result can be inflation and asset bubbles that can curb their critical exports.
But Bernanke said central banks could ease those concerns by allowing a degree of inflation, which he contended would strengthen their domestic economies and make them less dependent on cheap exports to the West.
The Journal said Bernanke's statements appeared to be aimed at China in particular. China has been aggressive in its intervention in foreign-exchange markets as a means of keeping its own currency closely tied to the dollar, the newspaper said.
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