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Faster reform as low rates not enough to boost growth
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FINANCIAL leaders from the world’s 20 biggest economies agreed on Saturday 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.
But they also said they were confident growth would pick up and, as a result, interest rates in “some advanced economies” — code for the United States — 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 the Group of 20 finance ministers and central bankers said.
To limit the volatility of capital flows from emerging economies into dollars — the reason for concern about a future Federal Reserve hike — G20 financial leaders said they would avoid any surprise or excessive moves.
“We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimize negative spillovers, mitigate uncertainty and promote transparency,” they said.
Concern about the turmoil 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 the devaluation by China of its yuan in August, a move some see as a realignment to market rates rather than a move to help exports.
The Chinese devaluation and the stock market plunge on growth jitters were all part of a difficult path to a more liberal economy, officials said.
“It’s an unbelievably difficult transformation and it’s not surprising that there are bumps, that it’s not a perfectly smooth process, and I think we had plenty of explanations, opportunity to ask questions, and it was a dialogue,” IMF head Christine Lagarde said after the meeting.
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