G20 emerging economies welcome Fed policy transparency

CAIRNS, Australia - Agence France-Presse

Delegates prepare to hear the opening remarks at the G20 Finance Ministers and Central Bank Governors Meeting in Cairns on September 20, 2014. AFP Photo

G20 finance chiefs promised Sunday to "clearly communicate" their monetary policy actions "in a timely way", as emerging market member nations welcomed the US Federal Reserve's transparency on its tightening measures.
      
"We will continue to clearly communicate our actions in a timely way and be mindful of impacts on the global economy as policy settings are recalibrated," finance ministers and central bankers from the Group of 20 of the world's biggest developed and emerging economies said in a communique following a meeting in Cairns.
      
"We are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility."       

An improving US economy has led the Federal Reserve to withdraw its unprecedented stimulus and recently flag a possible sharper-than-expected rise in interest rates when it does start increasing them. But central banks in Europe and Japan are set to continue pursuing loose monetary policies amid stuttering growth.
      
The tightening of US monetary policy has sparked concerns among emerging economies fearful of capital flight.
      
But European Central Bank board member Benoit Coeure said G20 members from emerging economies welcomed the transparency shown by Fed chair Janet Yellen at the meeting.
      
"It was important to notice the transparency of our Fed colleagues -- the transparency of Fed chair, Mrs Yellen -- on their path of tightening of monetary conditions, which was communicated in a very clear and comprehensive manner to the G20," Coeure said.
      
"This has been very appreciated by the colleagues from emerging markets and economies."        Coeure said the central bankers were also aware of the financial stability risks posed by the low interest-rate environment, which was highlighted by the Financial Stability Board before the G20 meeting.
      
"It is critical that the G20 retains its commitment to strengthening macroeconomic, structural and also financial policy frameworks to respond to such risks," he added.
      
International Monetary Fund chief Christine Lagarde said she believed central banks were equipped to tackle the possible build-up of excessive risks.
      
"we believe that central banks do have the tools, particularly the macro-prudential tools, to actually react to potential excess evaluation in various corners of the market and they have all committed to potentially use them if and when necessary," she said.