MOSCOW: The Group of 20 backs clear monetary policies, Russia said yesterday, reflecting the concerns of developing economies that a withdrawal of US monetary stimulus could cause market turmoil and capital flight.
Moscow hosts finance ministers and central bankers from the world’s top developed and developing markets next week amid nervousness over when Washington will wind down its programme of so-called quantitative easing.
“I think everyone will be against any sudden changes in currency exchange rates and monetary policies,” Finance Minister Anton Siluanov said. Any tightening of monetary policy, such as the withdrawal of quantitative easing, “should be done in a predictable and consistent matter,” he added.
“We (the G20) should not create reasons for instability,” Siluanov said. “The policy of countries issuing reserve currencies should be predictable.”
Russia, the first big emerging economy to take the annual presidency of the G20, and other developing nations have grown anxious after Chairman Ben Bernanke first said in May the US Federal Reserve may scale back its massive asset purchases.
The rouble and Moscow stock indexes fell to one-year lows, while the Brazilian real and its stock market hit four-year lows. In more dovish comments that are likely to ease those concerns going into the Moscow talks, Bernanke said a highly accommodative policy would be needed for the foreseeable future.
“If the policy of quantitative easing in the United States is terminated, this can lead to excessive nervousness on the markets, especially in emerging markets; it can lead to an outflow of capital from these markets,” said Siluanov.
Siluanov welcomed the latest comments by Bernanke, who will not attend the Moscow talks, and said they had been well received by financial markets. The Fed is spending $85bn a month to buy bonds as it seeks to ease the cost of credit. “It is too early to be talking now about the end of the quantitative easing when the global economy is still in a recession trend,” said Siluanov, 50, who took over from Alexei Kudrin in 2011.
The meeting’s main task next week will be to prepare the agenda for a G20 leaders’ summit in St Petersburg on September 5-6.
The BRICS — Brazil, Russia, India, China and South Africa — will meet in Moscow to discuss preventive measures needed to stabilise their balance of payments in the event that a “taper” of the Fed’s stimulus causes sharp capital flight.
Reuters
