Global central banks must do more to spot oncoming turmoil caused by years of their own ultra-loose monetary policy, while avoiding being cast by governments as the sole agents of economic recovery, the G30 financial-policy group said.
“While unconventional policies such as quantitative easing, off-balance-sheet commitments and forward guidance have played an important role in the management of recent crises, deeper studies are still needed to ascertain their longer-term overall benefits and unintended consequences,” the Washington-based G30 said in a report prepared for the IMF’s annual meeting in Lima, Peru, last week.
“Central banks alone cannot be relied upon to deliver all the policies necessary to achieve macroeconomic goals,” it said.
Led by former European Central Bank president Jean-Claude Trichet, the group acts as a thinktank made up of current and previous policy practitioners on global financial issues.
The report echoes and broadens concerns voiced by Trichet during his 2003 to 2011 term in office that while monetary policy can fight immediate financial turmoil, it cannot address the underlying causes of and risks associated with weak economic performance.
“Longer-term price stability is the most important contribution central banks can make to ensuring strong and sustainable growth,” the report said.
“Governments have a responsibility to address structural, regulatory and other weaknesses in the real economy that might otherwise contribute to the gestation of future crises,” it said.
Separately, global finance leaders believe China is likely to weather its slowing growth and manage a successful transition from an export to a consumer economy, despite a huge build-up of internal debt in the world’s second-largest economy.
The IMF believes the Chinese economy could grow 6.8 percent this year and 6.3 percent next year, slower than recent levels, but still enough to keep driving global economic growth when other positives have largely disappeared.
French Minister of Finance Michel Sapin is among the optimists, along with British Chancellor of the Exchequer George Osborne and IMF managing director Christine Lagarde.
“We are satisfied by the measures currently being implemented by the Chinese government to limit the risk of contagion caused by the economic downturn in the short run,” Sapin said on Friday.
Additional reporting by Reuters
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