WASHINGTON The United States will call on G20 countries this week to use fiscal policy in order to boost global demand, a senior U.S. Treasury official said on Monday.
“We will urge greater use of policy space, including fiscal space, to bolster global demand. That would lead to strengthened confidence and I would expect reduce volatility,” the Treasury official said in a preview call with reporters ahead of a G20 meeting later this week in Shanghai, China.
G20 finance ministers, including U.S. Treasury Secretary Jack Lew, and central bank governors will meet on Feb. 26-27, with sagging global growth, divergent monetary policies and currency devaluations set to dominate the agenda.
While there, the United States will also urge all members to refrain from manipulating exchange rates for competitive purposes, in line with existing G20 commitments, said the official, who spoke on condition of anonymity.
“I see those commitments as being a strong indication from G20 members that they will manage their currencies in ways that are globally consistent. I think that those commitments are very, very important,” the official said.
Lew has repeatedly called on China to more clearly communicate its currency policies and actions amid uncertainty over Beijing’s transition to a market-determined exchange rate.
Recent Chinese efforts to improve its communications have been constructive, the official said.
China’s economic slowdown has also skittered financial markets as it seeks to rebalance its economy toward consumption-led growth.
The senior Treasury official said that supply-side reforms in China were “crucial” as it pivots to a stronger services sector, and praised the country’s ongoing efforts to reduce excess capacity.
Lew is scheduled to travel to Beijing for two days immediately following the G20 gathering, where he will meet with senior Chinese government officials, Treasury said in a statement.
In those meetings he will urge China to “follow through” on its commitment to market-based economic reforms, the senior Treasury official said.
On Friday, IMF chief Christine Lagarde called on G20 officials to focus on global economic spillovers from their policy decisions.
An increasing number of central banks, including the European Central Bank and the Bank of Japan, have turned to negative interest rates over the past year in order to avoid deflation and promote economic growth.
(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)