MOSCOW (Reuters) - The Group of 20 should brace for more market volatility even as an improving U.S. economy allows the Federal Reserve to scale back its monetary stimulus, Russia’s summit coordinator Ksenia Yudayeva said on Wednesday.
She spoke after Chairman Ben Bernanke told Congress that the U.S. central bank still expects to start scaling back its massive bond purchases later this year, but left its options open in case the economic outlook shifted.
“The events we just saw have proved that we will not necessarily have less volatility - we will probably have quite a lot. We should rather prepare for this,” Yudayeva told Reuters in an interview on Wednesday.
Bernanke’s first public hint in May that he would wind down bond purchases worth $85 billion a month sent stock and bond markets into a tailspin, while capital fled emerging markets for dollar-denominated assets.
Even with consistent messaging, markets can be expected to be volatile, as they were during the Latin American debt crisis of the 1980s or the Asian crisis of 1997, as markets adjust to a new reality, said Yudayeva, a U.S.-trained economist.
“Consistent and clear messaging is important but it will not necessarily stop volatility. It can decrease volatility a bit - but it cannot get rid of it,” she added ahead of a meeting of G20 finance ministers and central bankers in Moscow this week.
Yudayeva, a former chief economist at state-controlled Sberbank, was hired by President Vladimir Putin to coordinate preparations for this year’s G20 leaders’ summit, being held in St Petersburg in September.
She said officials meeting in Moscow on Friday and Saturday would seek greater clarity on how China planned to deal with its economic slowdown and strains in its financial sector.
“It would be good if China provided more information,” she said.
Yudayeva, just back from a trip to Washington, also said officials there continued to oppose calls for G20 countries to make firm commitments to curtail their borrowing.
The greater U.S. concern is that Europe, and its largest economy Germany, should take steps to revive a broad weakening of economic activity, she added.
“The main point of the Americans is not that they are resisting flexible, medium-term fiscal targets,” she said. “The major request is for the Europeans to go into some demand-stimulating policies.”
Writing by Douglas Busvine; Editing by Lidia Kelly and Catherine Evans