Shanghai: Finance chiefs from the Group of 20 agreed to consult closely on foreign exchange markets and reiterated past pledges to refrain from competitive devaluations.
The G-20 members agreed to use monetary, fiscal and structural tools to boost growth, according to a final communique released in Shanghai on Saturday. Underscoring concerns over the limitations of central bank-led stimulus, “monetary policy alone cannot lead to balanced growth,” the document said.
Leading into the meetings, Bank of England governor Mark Carney warned counterparts against getting embroiled in a currency war by pushing interest rates too low, while International Monetary Fund managing director Christine Lagarde said the effects of monetary policies, even innovative ones, are diminishing.
With the UK mulling spending cuts, Japan planning a sales tax increase, Germany’s finance minister warning debt-funded growth just leads to “zombifying” economies, and the US constrained by a lame duck president and Republican-controlled Congress, it may fall to China to ratchet up the fiscal firepower.
“Investor hopes of coordinated policy actions proved to be pure fantasy,” said David Loevinger, a former China specialist at the US Treasury and now an analyst at fund manager TCW Group Inc. in Los Angeles. “It’s every country for themselves.”
Steep losses on global stock markets and volatility in currencies this year had fueled calls for G-20 members to do more to stoke demand and bolster stability. The IMF last month trimmed its global growth projections and said 2016 would be a “year of great challenges.” Bloomberg
