IMF President urges all countries to continue hiking interest rates in , accusing the UK of tax cuts.
On October 13, the rotating chairman of the G20 (G20) hosted the fourth meeting of the Treasury Secretary and the Central Bank Governors in Washington, USA in the United States, using an online and offline combination. The meeting is part of the broader International Monetary Fund (IMF) annual meeting.
conference focuses on global challenges such as ongoing inflation , record debt in emerging developing countries , climate change and food security.
Finance ministers warned that the world economy is sliding towards recession and that risks may continue until next year, and called on policy makers to take a coordinated response. "The world is in danger," Indonesian Finance Minister Sri Mulyani Indrawati summarized the discussion after the meeting.
"We are now facing increasing risks, high inflation, weak growth, energy and food insecurity or crisis, climate risks and geopolitical split...the risk of recession is increasing."
Indrawati said that policymakers of some of the world's largest economies need to be "very paying great attention to the potential spillover effects on other countries" and "we must take a painful step to restore economic stability and recovery."
According to Indrawati, about 85% of G20 members representing the global economy have made the following commitments:
strengthen coordination on issues that are crucial to global economic stability and prosperity, including food and energy crisis;
is more committed to ensuring the long-term resilience of the international financial architecture, especially when so many low- and middle-income countries are in debt difficulties at high interest rates. The G20 Group will continue to work to ensure the implementation of the common framework and try to reorganize debts in low-income countries based on specific circumstances;
makes greater progress in financial sector regulation, especially in the case of surge in crypto assets;
promotes climate investment and revitalizes infrastructure in a "sustainable, inclusive and affordable way";
reaffirms its commitment to implementing an international tax package.
Japanese Finance Minister Shunichi Suzuki told reporters on Friday that the G20 Finance Ministers and the Governors' Meeting will end with the Chairman's summary, without a joint communiqué.
The strong dollar has become the hottest topic, the IMF has no intention of stopping the increase
The effect of interest rate hike spreads around the world, and the strong dollar has dominated all topics.
According to people familiar with the matter, at the meeting, Treasury Secretary of various countries directly mentioned the issue of the appreciation of the US dollar to the IMF, the US Treasury Department and the Federal Reserve , but did not complain, but hoped to explain to the United States face to face the impact of the appreciation of the US dollar.
IMF President Georgieva said that thinking about the situation where US inflation cannot be controlled for a long time is not conducive to the United States and will also spill overflow to other countries. The governor of the South African central bank has similar views. Even if , South African rand, , fell to the historical low against the dollar, against the dollar, he said that if the Fed does nothing at the moment, it will need to tighten more forcefully in the future and pay a higher price.
However, the United States has no intention to prevent the US dollar from appreciation. U.S. officials have repeatedly admitted in public or private that the appreciation of the dollar has had an impact on other countries. U.S. Treasury Secretary Yellen said on Wednesday, "We will pay attention to the impact of U.S. policy on all parts of the world." But Yellen has never hinted at this willingness to take such action so far.
USD also rose strongly in the 1980s, and helped the industrial power finalize the " Square Agreement " in 1985, and jointly suppress the appreciation of the USD. However, while signing the agreement, the Federal Reserve has lowered the federal funds rate from nearly 15% in 1980 to below 4%, and it seems that the United States has only one way to continue hikes.
Deutsche Bank analyzed that the United States likes strong US dollars at this moment. If extreme geopolitical developments lead to market chaos, central bank intervention is still possible. But unless the global macro environment changes—first, U.S. inflation peaks and drops significantly—it is difficult to see the political or monetary necessity of coordinated intervention in foreign exchange.
IMF President urges central banks to continue hike interest rates
IMF President Georgieva said that the International Monetary Fund is still urging central banks to continue to tighten monetary policy , "because inflation has been quite stubborn, the risk of inflation expectations being out of anchorage becomes more obvious."
"We can't let inflation become an out-of-control train," Georgieva added.
When asked whether inflation can be curbed in the context of the ongoing conflict between Russia and Ukraine, Georgieva said that currency tightening will help control prices because it will cool down demand and lower prices for energy, food and other commodities , “regardless of whether the conflict continues or not.” But she said more research is needed to understand the impact of supply chain restructuring and global economic and geopolitical split on long-term price trends.
IMF accused the UK of tax cuts, and the British Chancellor of the Treasury left the seat early
According to a spokesperson for the Ministry of Finance, British Chancellor Kuateng left the seat early at the IMF meeting and returned to London, and did not attend Thursday's G20 Finance Ministers and Central Bank Governors' meeting because the UK is preparing to make a 180-degree turn on domestic taxation issues. Kuateng wants to rush back to China to participate in the formulation of the government's long-term fiscal plan.
It has been reported that the British government is preparing to abandon its massive tax cuts that have seriously disrupted the UK market in the past three weeks. According to a person familiar with the matter, anonymous, officials from the UK Treasury are drafting options for Trass and Quatten, but no final decision has been made. According to sources, there will be no new changes before the weekend, but any announcements may be released by October 31. Negotiations are underway, so there is no definite schedule.
It is worth noting that when Bank of England Governor Bailey was asked by reporters at the meeting whether abandoning the massive tax cuts would end weeks of turmoil in the UK financial market, he did not give a reply, but smiled.
This Friday, the Bank of England will end emergency bond purchase plans with a total of £65 billion. IMF President Georgieva praised the Bank of England's bond-buying support actions, saying it was appropriate and addressing the risks facing financial stability, while accusing Tras of the aggressive and recklessness of the £45 billion tax cut. She told Quatten and Bailey that their policies should not conflict with each other. Georgieva said:
"The message we convey to everyone (not only the UK) at this time is that fiscal policy should not undermine monetary policy, because if we do so, the task of monetary policy will only become more difficult and transform into further interest rate hikes, increasing the necessity of interest rate hikes, and tightening financial conditions. So don't prolong the pain."
Yi Gang: The central bank will increase the implementation of prudent monetary policy
People's Bank of China Governor Yi Gang attended the meeting via video link. In his speech, Yi Gang introduced China's economic situation and monetary policy position, saying that China's price level is basically stable, and the People's Bank of China will increase its implementation of prudent monetary policy to provide stronger support for the real economy, focus on supporting infrastructure construction, support financial institutions to issue loans for equipment renewal and transformation in key areas such as manufacturing, and at the same time promote the accelerated implementation of special loans for "guaranteeing and transferring buildings" to promote the stable and healthy development of the real estate market.
Yigang welcomes the implementation progress of the G20 common framework for debt disposal, saying that China will continue to work together with all parties to implement the work, and private sector creditors should participate in a comparable manner, and welcomes the IMF's proposal to establish a new global public infrastructure in the field of payments and enhance the resilience of the international monetary system.
IMF President: India is the only "highlight"
IMF President Georgieva praised India's structural reforms, saying that India can play a role in bringing more equity to the IMF, and called India a "highlight" on a dark horizon because it has been a fast-growing economy.
Georgieva said that digitalization played an important role in India's success. Earlier this week, the IMF lowered India's fiscal 2023 growth forecast to 6.8% from an earlier estimate of 7.4%.
Indian Finance Minister Nirmala Sitharaman said at the meeting that the global economy today faces various challenges, and preventing the intensification of risks is everyone's collective responsibility.
Statement: The copyright of this article belongs to Jinshi Data. Any commercial organization, website, company or individual is prohibited from reprinting or reuse of the information in the article without written authorization. Violators will be prosecuted.
