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MNI POLICY: G20 CenBanks Concerned About Rate Normalization

RIO DE JANEIRO

Central bankers gathered at the G20 meeting in Rio de Janeiro this week are concerned about potential disruptions from countries' efforts to normalize monetary policy after a prolonged period of elevated borrowing costs, MNI understands.

They discussed the possibility that developed economies could maintain higher interest rates for longer while emerging markets are likely to remain easing.

Officials fear this juxtaposition could disrupt the global currency markets interest rate differentials rise. Central bankers also expressed worries about the final stages of the inflation fight, known as "the last mile," noting that prices are taking longer than expected to fall.

At the meetings, emerging countries continued to advocate for a revision of quotas and an increase in the voting power of developing members based on their share of participation in the International Monetary Fund (IMF), aiming to better reflect each country's economic weight.

A key sticking point is China, the United States' main geopolitical rival, since it would stand to gain more power within the Fund due to its significantly larger footprint in the world economy.

PAYMENTS INTEGRATION

Since the first round of meetings in February in São Paulo, central banks have discussed the potential integration of payment systems between different countries, but the topic does not appear to be progressing. The official communiqué, expected to be released this Friday if there is consensus, will likely reiterate the commitment to continue discussing the matter.

Some countries have proposed that the integration of payments begin with commercial transactions, for example.

In February, Brazil couldn't build a consensus due to a divergence over geopolitical conflicts. This time, the strategy is to leave this topic out of the official statement, according to Brazilian officials.

Central bankers and finance ministers from the G20, which groups the world’s largest economies, have gathered in Rio de Janeiro this week, with hosts Brazil encouraging discussions on social inequality. Technological innovation and financial stability have also been discussed.

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