Group of 20 backs clear monetary policies, says Russia

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

PICTURE: 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.