G20 to seek reassurance from U.S. Fed and China

Tue Jul 16, 2013 7:31pm EDT
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By Lidia Kelly and Douglas Busvine

MOSCOW (Reuters) - G20 summits do not always set the pulse racing, but this week's gathering of finance ministers and central bankers in Moscow has a better chance than most of grabbing the attention of financial markets.

The policymakers meet at a sensitive time with the U.S. Federal Reserve intent on slowing, then exiting a bond-buying program that has been creating $85 billion a month, and Beijing trying to rebalance the world's most dynamic economy.

Chinese growth slowed only moderately in the second quarter and after causing ructions in world financial markets, Fed Chairman Ben Bernanke has been at pains to stress he will only halt the money-printing presses if he sees stronger evidence of U.S. recovery.

Nonetheless, the Group of G20 leading economies will seek reassurances that neither will upset the apple cart.

Emerging nations have seen dramatic investment outflows since the Fed announced its exit plan, forcing policy responses around the world.

Indonesia and Brazil have raised rates, India tightened liquidity as the rupee plunged to a record low and Turkey's central bank has intervened repeatedly to defend the lira.

"A key consideration going forward is the unwinding of unconventional monetary policy, where careful phasing and clear communication will be critical," International Monetary Fund chief Christine Lagarde said on Tuesday.

South Korea echoed that concern, its finance ministry demanding the Fed consider "not only its domestic conditions but also the global effects", before acting.   Continued...

A general view is seen of the Manezh Exhibition Center, venue for this week's meeting of G20 Finance Ministers, in Moscow July 16, 2013. REUTERS/Sergei Karpukhin