U.S. Treasury Secretary Jacob J. Lew said the world economy will stay weak unless countries, especially in emerging Asia, boost spending, pursue flexible exchange rates and avoid competitive devaluation of currencies.
“In the absence of offsetting demand growth from surplus economies, overall global growth will remain weak,” Lew said today in a statement to an International Monetary Fund committee.
Many countries, “especially in emerging Asia,” should “move more rapidly toward market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluation of currencies,” he said. “Countries must also fulfill their commitment not to target exchange rates.”
In China, the process of exchange-rate adjustment “remains incomplete and more progress is needed,” Lew said. “Sustaining this progress will require further efforts to boost household demand and reinvigorate the move to market determination of the exchange rate and interest rates.”
Lew urged the International Monetary Fund to do its part in its surveillance over members’ exchange-rate policies, which remains at the “core of the fund’s mandate.”
“There continues to be a need for a more rigorous emphasis on excessive foreign exchange intervention and reserves accumulation in bilateral surveillance,” Lew said. “We encourage all IMF members to be transparent with respect to foreign exchange intervention and reserves composition.”