Following on May 17's "G7 long bond stress intensifies".
From Reuters, May 17/18:
- Finance ministers and central bankers to discuss inflation, volatility
- France puts deep-seated global economic imbalances on the agenda
- Lescure says G7 offers opportunity for frank dialogue
- Meeting follows US-China summit that yielded few economic breakthroughs
G7 finance ministers met in Paris on Monday, looking to find common ground on tackling economic tensions and global imbalances in the wake of a bond market selloff triggered by concern over inflation risks from the Iran war.
Ministers are set to discuss the economic fallout from the conflict and volatility on global bond markets, which are of particular concern to Japan. Bonds from Tokyo to New York extended losses on Monday, with investors betting on central bank rate hikes over worries that rising energy prices could stoke inflation.
Asked if bond markets were collapsing, French Finance Minister Roland Lescure said "they’re undergoing a correction - I wouldn't say they’re collapsing"."We are no longer in a period where public debt is not a subject," he told reporters as he arrived at the meeting.
DIVISIONS IN G7 SET STAGE FOR TRICKY MEETING
The meeting, which will also be attended by representatives from G7 central banks, will tackle how countries can co-ordinate their response to shocks such as inflation through temporary, targeted and reversible measures, the French finance ministry said.
Asked on arrival if she was worried by the bond selloff, European Central Bank head Christine Lagarde told reporters: "I always worry, that's my job.”
The G7 finance ministers will try to find common ground on tackling global economic tensions and coordinating critical raw material supplies. But divisions within the G7 complicate efforts to project unity as ministers prepare for a June 15-17 leaders summit in the spa town of Evian.
At the core of the Paris agenda will be what Lescure described prior to the meeting as deep-seated global economic imbalances that are fuelling trade friction and risk a turbulent unwinding in financial markets.
"The way the global economy has been developing for the past 10 years or so is clearly unsustainable," he said, pointing to a pattern in which China under-consumes, the United States over-consumes and Europe under-invests....
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