Fed’s Powell Minimizes Risk Of Market Contagion From Evergrande Debt
Federal Reserve Chairman Jerome Powell said the United States has little direct exposure to debt from Chinese company Evergrande, but it could impact global financial conditions.
“The Evergrande situation seems very peculiar to China, which has a very high debt for an emerging economy,” he told reporters on Wednesday at a press conference after a meeting of the Federal Open Market Committee responsible for defining policy.
Fears of default by real estate developer China Evergrande Group rocked global financial markets this week and raised concerns about the potential fallout on China’s economic outlook.
“Corporate defaults in the United States are very low right now,” Powell said. “You would be concerned that this would affect global financial conditions through the channels of trust.”
The Fed seeks stable prices and maximum jobs in the United States, but the central bank also takes global growth prospects into account when setting its policy, as this can affect the domestic economy, including changing demand. US exports or the dollar.
Billionaire Hui Ka Yan’s developer is widely seen as heading for one of China’s biggest debt restructurings, though the company and Communist Party leaders have so far given little guidance. on how they plan to resolve its liquidity crisis.
Evergrande failed to pay loan interest owed on Monday to at least two of its biggest bank creditors, according to people familiar with the matter. Earlier on Wednesday, the company released a loosely worded statement about a bond interest payment that left analysts grasping the details. The developer, Asia’s largest junk bond issuer, also has an interest payment due Thursday on a March 2022 dollar bond.
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