Group of 20 backs clear mone­tary poli­cies, says Rus­sia

Weekend Argus (Saturday Edition) - - BUSINESS -

MOSCOW: The Group of 20 backs clear mone­tary poli­cies, Rus­sia said on Thurs­day, 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 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 fouryear lows.

In more dovish com­ments on Wed­nes­day 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 US 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.

He wel­comed Ber­nanke’s lat­est com­ments and said they had been well re­ceived by fi­nan­cial mar­kets. The Fed is spend­ing $85 bil­lion (R850bn) 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.

The meet­ing’s main task next week will be to pre­pare the agenda for a G20 lead­ers’ sum­mit in St Peters­burg in Septem­ber.

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.

There has been in­creased talk in re­cent weeks among the emerg­ing mar­kets cau­cus on de­vis­ing a co­or­di­nated pol­icy to limit the neg­a­tive ef­fects that a stronger dol­lar could have on their com­mod­ity- driven economies. The BRICS plan to set up a re­serve pool of up to $240 bil­lion and a de­vel­op­ment bank by their next sum­mit next year. – Reuters


EN­TIC­ING: A de­liv­ery man pushes a trol­ley past an ad­ver­tise­ment for lux­ury-watch brand Omega in Tokyo yes­ter­day. Ja­panese Prime Min­is­ter Shinzo Abe’s ag­gres­sive eco­nomic stim­u­lus mea­sures, aimed at lift­ing Ja­pan out of two decades of de­fla­tion, hinge on a pick-up in con­sumer spend­ing. But eight months af­ter its launch, ‘Abe­nomics’ has yet to con­vince many Ja­panese to part with their thrifty ways.

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