The IMF has released the report it prepared for last week's futile G-20 session, which incidentally saw the IMF being shut out of bailing out the Eurozone: a development which was adverse at the time but now is largely irrelevant: after all Greece has a new parliament, if still no ink to print tax forms. So what did the IMF say? Here are some key soundbites.
On the future:
- Recovery remains in low gear in major advanced economies with elevated risk of falling back into recession. Policy paralysis and incoherence have contributed to exacerbating uncertainty, a loss of confidence, and heightened financial market stress—all of which are inimical to demand rebalancing and global growth prospects.
- Thus, understanding large imbalances within and across countries has taken on renewed importance. Policy makers need to move with a greater sense of urgency on reaching an agreement on policies that will reduce imbalances and lay the foundation for restoring the global economy to health.
On the past i.e., "one-time", "non-recurring" central bank interventions:
- Monetary accommodation has been crucial for alleviating the financial crisis and recession. Economies hardest hit by the crisis—the major advanced G-20 economies—have kept policy rates exceptionally, but appropriately, low. Headline inflation in these economies rose earlier in the year because of commodity prices (and, in the notable case of the United Kingdom, because of consumption tax increases), but underlying inflation remains subdued in environments of weak demand and high unemployment. The recent moderation in energy and food prices will further dampen inflationary pressures. The European Central Bank has raised policy rates (but they remain at low levels), and monetary policy rates remain close to the zero bound in the United States, United Kingdom, and Japan. Should downside risks materialize, further easing would be warranted.
Well, maybe not so much "one-time"... maybe "constant" and "global" is better:
- The major advanced economies have also used unconventional monetary policy measures to stimulate the economy. In the United States, the second round of quantitative easing measures was completed as scheduled in June. The Bank of Japan introduced a new asset purchase program that covered private securities, in addition to government securities. The ECB has extended the full allotment regime of its refinancing operations until at least October 2011 and reinstated its supplementary refinancing operations, and has resumed buying euro area government bonds and extending credit through its securities market program. In the United Kingdom, the stock of bond purchases has remained unchanged since early 2010.
On China FX bashing:
- Some progress has been made toward greater exchange rate flexibility, but key surplus economies continue to intervene to limit appreciation. Exchange rate adjustment is critical for global rebalancing and sustaining strong growth. Most G-20 members have floating exchange rate regimes with minimal interventions. Some members have made good progress toward exchange rate flexibility with fewer interventions (e.g., India), but in other cases, progress has been limited (e.g., China).
And so on.