What was supposed to be a routine meeting this weekend for the Group of 20 large economies has become more serious. The central bankers and finance ministers meeting in Ankara have watched in alarm as the rout in Chinese stock markets has driven down asset prices and emerging market currencies across the world.
There has been little consensus about how to respond. The apparatus of international policy co-ordination, including the G20 itself, is somewhere between feeble and non-existent. Still, there is room for central banks and finance ministries to offset the shock emanating from China and the commodity markets.
The International Monetary Fund, continuing its historically unusual role as dove-in-chief, chimed in this week with a warning that the world’s leading central banks should avoid raising interest rates, given the increasing risks to growth. The fund is most likely right. Employment data released on Friday continued the trend of steady growth in US output and jobs, but inflation and inflation expectations remain quiescent. Such conditions argue for the Federal Reserve to keep rates on hold later this month.