February 17, 2011Central bankers centre stage as G20 policymakers gather
The world's top central bankers will take centre stage on Friday ahead of a G20 meeting which appears set to struggle to make headway on an ambitious French agenda.
The monetary policy chiefs of the United States, euro zone, China, Japan and Britain will share a public platform in Paris, with their notable policy differences and worries about resurgent inflation of key interest to financial markets.
Emerging powerhouses China and India have already raised interest rates to combat inflation, and pressure is mounting on the Bank of England to follow suit, with UK inflation double its 2 percent target.
The European Central Bank is not expected to tighten policy until late in the year at the earliest while the Federal Reserve continues to print money to pump prime its economy via a $600 billion (370 billion pound) bond purchase programme.
The world's top central bankers will take centre stage on Friday ahead of a G20 meeting which appears set to struggle to make headway on an ambitious French agenda.
The monetary policy chiefs of the United States, euro zone, China, Japan and Britain will share a public platform in Paris, with their notable policy differences and worries about resurgent inflation of key interest to financial markets.
Emerging powerhouses China and India have already raised interest rates to combat inflation, and pressure is mounting on the Bank of England to follow suit, with UK inflation double its 2 percent target.
The European Central Bank is not expected to tighten policy until late in the year at the earliest while the Federal Reserve continues to print money to pump prime its economy via a $600 billion (370 billion pound) bond purchase programme.
In a paper prepared for the two-day Group of 20 meeting starting on Friday, the International Monetary Fund said the United States' policy of quantitative easing could cause a destabilising flood of capital, though it conceded this had not happened so far.
Slow economic recoveries were keeping wages and inflation in check in the developed world, so accommodative monetary policy was therefore "the right policy" from a domestic point of view, the report obtained by Reuters said.
"From an external perspective, however, there is concern that quantitative easing in the United States could result in a flood of capital -- though the recent data are not bearing this out," it said.
China and other emerging nations say the U.S. "QE2" policy risks inundating their economies with "hot money" inflows.
U.S. Treasury Secretary Timothy Geithner has been trying to prompt China into letting the yuan rise more swiftly, something Washington says is vital for rebalancing global growth.
Fed Chairman Ben Bernanke, ECB President Jean-Claude Trichet, Bank of Japan Governor Masaaki Shirakawa, the Bank of England's Mervyn King and People's Bank of China head Zhou Xiaochuan will speak at an event in Paris at around 2:30 p.m. British time on Friday.
Geithner is also due to speak at the conference organised by the Eurofi think tank.
France, chair of the G20 this year, has already run into opposition with its push for greater transparency and regulation of commodities prices and a reform of the international monetary system and is pinning its hopes on nailing down an accord on measuring imbalances in the world economy, where the G20 nations account for around 85 percent of GDP.
But here too expectations are being lowered. French Economy Minister Christine Lagarde said on Thursday the G20 meeting will have made major progress if it clinches a preliminary accord on what measures to use to benchmark and address mismatches that could trigger a future financial crisis.
The big picture of imbalances -- which could not continue -- was a world where China saved and exported, Europe consumed and the United States borrowed and consumed, she said.
The United States and the IMF consider it vital to have agreement on a set of indicators by mid-year so that guidelines can be agreed later in the year for coordinated global economic policies to reduce dangerous imbalances.
France is pushing for the same.
But other delegates in Paris say a more realistic deadline would be October, just a month before the major set-piece G20 leaders summit at which major initiatives are due to be signed off.
With France's G20 agenda moving at a glacial pace, other issues could come to the fore on Friday and Saturday, such as global inflation or the ongoing euro zone debt crisis.
A euro zone source reported Thursday that European Union member states are increasingly concerned about Portugal's ability to fund itself in financial markets and believe Lisbon will need to seek a bailout by April, following in the footsteps of Greece and Ireland.
AP
