July 16, 2013 / 10:09 PM / in 5 years

Canada shows understanding of Fed tapering plans, ahead of G20

OTTAWA (Reuters) - A G20 meeting in Moscow this weekend is likely to discuss the U.S. Federal Reserve’s plans to taper its aggressive buying of bonds, a senior Canadian finance official said on Tuesday, but he declined to endorse emerging-market criticism of those plans.

A prominent feature of the talks among finance ministers and central bankers of the Group of 20 leading economies will be the increased market volatility that has emerged since they last met in Washington in April, the Canadian official said.

He said, however, that there were many sources of that volatility, appearing not to want to pin it all on the Fed, which has effectively said injecting massive amounts of new cash forever is unsustainable. Canada would certainly support policies that manage and sustain the U.S. recovery, the official said.

It was clear that emerging markets had undergone increased volatility in capital flows and exchange rates, he added, and the volatility merited discussions in Moscow.

However, it is impossible to say which way the July 19-20 discussions would go and whether this would be reflected in the communiqué.

Japan, which is engaged in heavy fiscal and monetary stimulus, has also attracted criticism for not doing enough structural reform to eliminate rigidities in its labor and farm markets and elsewhere.

The Canadian official declined to say whether Ottawa or the G20 would join criticism of Japan on this point, but said that there was a need for structural reform in Japan and globally.

He said this would be reflected in the action plan that the G20 summit in September in St. Petersburg, Russia, would put out.

The G20 will also want to hear from China, where growth has been slowing, about its plans to address the imbalances in its economy, he added.

Reporting by Randall Palmer; Editing by Stacey Joyce and Mohammad Zargham

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