Breaking News

Tweet TWEET

Merkel Joins Developed Nations Backing Fed Taper Before G-20

Photographer: Andrew Harrer/Bloomberg

The Marriner S. Eccles Federal Reserve building stands in Washington, D.C. Close

The Marriner S. Eccles Federal Reserve building stands in Washington, D.C.

Close
Open
Photographer: Andrew Harrer/Bloomberg

The Marriner S. Eccles Federal Reserve building stands in Washington, D.C.

Developed nations are voicing support for the withdrawal of U.S. monetary stimulus and signaling emerging markets will have to cope with the fallout as best as they can.

German Chancellor Angela Merkel’s administration sees U.S. monetary normalization as necessary, a government official told reporters in Berlin overnight. The comment echoes Australian Treasurer Joe Hockey, who in a Feb. 13 interview likened Federal Reserve bond purchases to a drug that the world can’t rely on forever.

Market upheaval caused by reduced Fed stimulus is shaping up as a central theme for a Group of 20 meeting in Sydney this weekend, when central bankers and finance ministers will discuss the global economy. Policy makers in developing markets including Turkey and South Africa have been forced into emergency steps as investors sold off currencies, stocks and bonds after the Fed’s decision to scale back asset purchases.

India’s central bank Governor Raghuram Rajan last month warned of a breakdown in global coordination due to the tapering.

It’s up to each individual country to ensure it is robust enough to cope with the normalization of U.S. monetary policy, the Berlin official said on condition of anonymity. While the G-20 will discuss how emerging economies can prepare for the change, politicians shouldn’t interfere with the policies of independent central banks, the official said.

Balancing Act

“Our own central banks have the responsibility to act in our own national interests,” Australia’s Hockey said Feb. 13. “It’s a balancing act. The U.S. Fed can speak for itself, but I don’t see any systemic difficulties in developing nations.”

Finance ministers and central bankers will discuss the global economy at a time of “great transition” as the U.S. tapers stimulus, South Korean Finance Minister Hyun Oh Seok said in a briefing in Sejong today.

Former U.S. Federal Reserve Chairman Paul Volcker told a conference in Seoul this week that the impact of tapering won’t be as bad as markets fear and that stimulus won’t be withdrawn quickly, the Korea Economic Daily newspaper reported.

Still, former World Bank President Robert Zoellick said in Seoul today there will be greater differentiation among developing countries once the Fed begins tapering in earnest. This year will be tricky for the world economy, he said.

To contact the reporter on this story: Matthew Brockett in Sydney at mbrockett1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.