Wealthy Nations Daily Update - G20

Over the weekend the financial leaders from the world’s 20 biggest economies (G20) met in Ankara, Turkey for the third time to exchange views on the recent global economic events, as well as discuss actions required to achieve the ambitions for the group over the coming year. At the last summit the leaders agreed to boost global output over the next 5 years by 2% above what was already expected through coordinated reforms and investment. They acknowledged that ultra-low interest rates alone would not be enough to accelerate economic expansion globally and agreed to step up reforms in an effort to boost slowing growth to achieve this goal.

In a statement the finance ministers and central bankers said "Monetary policies will continue to support economic activity consistent with central banks' mandates, but monetary policy alone cannot lead to balanced growth," whilst highlighting that monetary policy tightening is more likely in some advanced economies, the US and UK. On this point the group was divided on when the Fed should move interest rates with the Turkish Deputy Prime Minister Cevdet Yilmaz telling a news conference "We heard different opinions on the possible Fed decision. Some think the Fed needs to make a decision sooner rather than later, while others think it should delay."

One area that the summit was very keen to emphasis was communication and transparency from the G20 to avoid ‘surprise or excessive moves’. They said "We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimise negative spillover, mitigate uncertainty and promote transparency."

The IMF head Christine Lagarde also acknowledged the Chinese currency movements over the last couple of weeks, as well as the stock market volatility, were all part of a difficult path to a more liberal economy. "It's an unbelievably difficult transformation and it's not surprising that there are bumps, that it's not a perfectly smooth process, and I think we had plenty of explanations, opportunity to ask questions, and it was a dialogue, and a very open one" she said after the meeting. The group also informally discussed the Chinese Government ambitions for the Chinese currency to become part of the Special Drawing Rights (SDR) sources said. US Treasury Secretary Jack Lew stated there was an openness for this to happen, as long as the PBoC continued with its promised reforms. He said "If they make the kind of reforms that they have committed to and indicated they are prepared to make, there's an openness to a positive outcome of the review."