G20 wary of scaring markets, promises careful policy shift

Fri Jul 19, 2013 4:27pm EDT
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By Jan Strupczewski and Gernot Heller

MOSCOW (Reuters) - The Group of 20 nations, wary of renewed market volatility, pledged on Friday to shift policy carefully and communicate clearly as they seek to navigate a path to recovery.

A final draft communiqué prepared for G20 finance ministers and central bankers meeting in Moscow said an action plan to boost jobs and growth, while rebalancing global demand and debt, would be readied for their leaders in September.

"We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing," the draft, obtained by Reuters, said. "Future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated."

Ministers reviewed the text over dinner with the recent global sell-off in stocks and bonds and flight to the dollar, caused by a plan to withdraw U.S. monetary stimulus, uppermost in their minds.

G20 leaders will meet in St Petersburg in September.

A paper that International Monetary Fund staff prepared for the Moscow meeting warned financial market turmoil could deepen unless policymakers were careful.

"The current market turbulence could continue and deepen. Growth could be lower than projected due to a protracted period of stagnation in the euro area, and risks of a longer slowdown in emerging markets have increased," the paper, seen by Reuters, said.

"The eventual exit from low rates and unconventional monetary policy in advanced economies could pose challenges for emerging economies, especially if it proceeds too fast or is not well communicated."   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