The financial leaders of the world’s biggest economies met in Turkey to discuss ways to accelerate economic growth
The financial leaders of the world’s biggest economies met on Saturday in Ankara, Turkey to discuss ways to accelerate economic growth. The G-20 have so far agreed that relying on low interest rates is not enough.
“Monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth,” said the communiqué of the G20 finance ministers and central bankers.
Indeed, they indicated that ‘some advanced economies’ – i.e. the United States – would have to raise their interest rates if the global economy was going to pick up. This was in direct defiance with the emerging markets, who insist that any rise in the US interest rate would damage growth prospects.
The G-20 leaders were careful to sooth any fears about capital flows by assuring emerging markets that the Fed would be avoid any sudden or unnecessary actions.
“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,” said the G-20 leaders.
Many present were most concerned about the volatility of China’s stock market and its impending economic slowdown. As the world’s second biggest economy, much relies on the country’s stability.
China’s finance minister Lou Jiwei emphasized the stability of China by stressing that the renminbi was not experiencing long-term devaluation. He also noted that fiscal spending would be as much as ten percent this year, more than the seven percent indicated in the budget released at the start of the year.
China has come under increased pressure in recent months to adjust its exchange rate to better reflect market fundamentals.
“When the world has called on China to move toward a more market-determined exchange rate, it’s in the context of doing so in an orderly way with clearly articulated policies that can be understood and that reinforce themselves in a positive way,” said US Treasury Secretary Jack Lew.
“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, and a very open one,” said IMF head Christine Lagarde.
The G-20 is already behind on its plans to increase boost global output by two percent. Only time will tell if the actions of the US and China will be enough to stabilize the economy and set it on the path towards increased growth.