UPDATE 1-All G20 members have role in softening volatility-Canada official

Mon Feb 17, 2014 12:07pm EST
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By Louise Egan

OTTAWA Feb 17 (Reuters) - Advanced economies must explain their monetary policy approach clearly to the rest of the world and some emerging economies need to strengthen policies in order to soften the financial market volatility during this unprecedented period of transition, a senior Canadian finance official said on Monday.

Briefing reporters about a Feb. 22-23 meeting of finance ministers and central bank chiefs from the Group of 20 advanced and emerging economies in Sydney, Australia, the official, who declined to be named, said the G20 needed to take a step back and take a broader view than just the U.S. Federal Reserve's tapering of its bond-purchasing program and the spillover effects.

Following the Great Recession, the global economy is going through a Great Transition, he said, and therefore it is not surprising that there be significant currency moves and other volatility. All major economies need to make big adjustments, he said, adding that mitigating the volatility requires action on everyone's part.

Without mentioning the United States, he said monetary policy in advanced economies must be well-communicated to the rest of the world and calibrated to the pace of the recovery, a message the G20 gave last year and which Canada expects to be repeated in Australia.

At the same time, he said the conclusion of the recent emerging market rout was that some countries with weak policy frameworks must strengthen their policies.

Again, he did not name specific countries, nor would he say whether the G20's final communique would contain language along these lines.

Bond, currency and stock markets in developing countries have swung wildly in recent months as the Fed scales back its quantitative easing program and concerns about a rapid slowdown in China spooked investors.   Continued...