Mon, Sep 07, 2015 - Page 1 News List

G20 officials push reforms to boost world’s economy

Reuters, ANKARA

Financial leaders from the world’s 20 biggest economies on Saturday agreed to step up reform efforts to boost disappointingly slow growth, saying reliance on ultra-low interest rates would not be enough to accelerate economic expansion.

However, they also said they were confident growth would pick up and, as a result, interest rates in “some advanced economies” — code for the US — would have to rise.

“Monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth,” the communique of G20 finance ministers and central bankers said.

“We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies,” it said.

The wording defied pressure from emerging markets to brand an expected US rate rise as a risk to growth.

“We heard different opinions on the possible [US FFed decision. Some think the Fed needs to make a decision sooner rather than later, while others think it should delay,” Turkish Deputy Prime Minister Cevdet Yilmaz told a news conference in Ankara.

To limit the volatility of capital flows from emerging economies into US dollars — the reason for concern about a Fed hike — G20 financial leaders said they would avoid any surprise or excessive moves.

Concern about the turbulence that might be caused by a possible Fed rate hike was amplified by investor worries over an economic slowdown in China, the world’s second-biggest economy.

G20 officials said they discussed Beijing’s last month, devaluation of the yuan, a move some might see as a realignment to market rates rather than a move to help exports.

The Chinese devaluation as well as the stock market plunge on growth jitters were all part of a difficult path to a more liberal economy, officials said.

“It is an unbelievably difficult transformation and it is not surprising that there are bumps, that it is not a perfectly smooth process, and I think we had plenty of explanations, opportunity to ask questions, and it was a dialogue, and a very open one,” IMF managing director Christine Lagarde said after the meeting.

US Secretary of the Treasury Jack Lew said that global economies were keen to see the world’s second-largest economy move to an exchange rate that reflected market fundamentals.

G20 officials welcomed improving activity in some economies, but said that growth fell short of expectations because reforms were not being implemented quickly enough.

“We are making progress towards our commitments, [but] ... more effort is needed for implementation,” the statement said.

Lagarde was even more explicit, making clear governments had for too long relied on the supply of cheap cash from central banks that have been running ultra-loose monetary policy.

“Monetary policy alone will not cut it. It is necessary. It is recommended from our perspective, particularly in Europe and in Japan still, but it will not cut it on its own,” she said. “Clearly in the fiscal sphere as well as in the structural reforms sphere, more needs to be done,”

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