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Moscow - The Group of 20 nations, wary of renewed market volatility, pledged on Friday to shift policy carefully and communicate clearly as they seek to chart a course to recovery.
A final draft communique prepared for G20 finance ministers and central bankers meeting in Moscow said an action plan to boost jobs and growth, while rebalancing global demand and debt, would be readied for their leaders in September.
"We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing," the draft, obtained by Reuters, said. "Future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated."
Ministers will review the text over dinner with the global sell-off in stocks and bonds and a flight to the dollar, caused by a plan to withdraw US monetary stimulus, uppermost in their minds.
G20 leaders will meet in St Petersburg in September.
A paper that International Monetary Fund staff prepared for the Moscow meeting warned financial market turmoil could deepen unless policymakers were careful.
"The current market turbulence could continue and deepen. Growth could be lower than projected due to a protracted period of stagnation in the euro area, and risks of a longer slowdown in emerging markets have increased," the paper, seen by Reuters, said.
"The eventual exit from low rates and unconventional monetary policy in advanced economies could pose challenges for emerging economies, especially if it proceeds too fast or is not well communicated."
Ben Bernanke's announcement two months ago that the Fed may start to wind down its $85bn in monthly bond purchases sparked a panicky sell-off, particularly in emerging markets.
Investors were calmed by testimony to Congress this week by Bernanke, who is not in Moscow, although he said the exit plan from money-printing remained on the cards.
"Clearly there is a fear among emerging market economies that after being flooded by capital inflows ... we could be on the verge of a reversal of that flood," a European Central Bank official said. "So it is important to dispel that worry."
China shift
G20 sources said China would be urged to encourage domestic demand-driven growth and allow greater exchange-rate flexibility as part of wider efforts to rebalance the global economy which features a huge Chinese surplus and matching US deficit.
"We are determined to continue progress with rebalancing of global demand, which requires internal rebalancing through structural reforms and exchange rate flexibility," the draft said.
Beijing offered an early olive branch, removing a floor on the rates banks can charge clients for loans, which in turn should reduce the cost of borrowing for companies and households.
The G20 took the lead in the 2008-09 financial crisis and now faces a multi-speed global economy in which only the United States appears to be nearing a self-sustaining recovery.
China, for years the engine of global growth, is suffering a slowdown amid doubts over the stability of its financial system, Japan has only recently embarked on a radical fiscal and monetary stimulus experiment, and Europe's economy is more stop than go.
Bank of Japan Governor Haruhiko Kuroda said he would "strongly pursue" quantitative policies to lift growth and end deflation.
"Japan has just started qualitative and quantitative easing on April 4. It's been only 3-1/2 months, and we need to proceed with it to achieve our 2% price stability target," he said.
Tokyo has so far been given a free pass at international gatherings from countries which had previously urged it to get growth going. But there is growing disquiet about the lack of progress on structural reforms that were promised in tandem.
The Brics emerging markets caucus - Brazil, Russia, India, China and South Africa - also met on Friday but joint measures to limit the fallout of a stronger dollar remained on the drawing board.
More to boost growth
Washington is putting increasing pressure on Europe to do more to foster growth. Germany, in contrast, is seeking internationally agreed debt reduction goals.
The communique referred to credible medium-term fiscal strategies but said they should be flexible. On growth, it was more definite, saying:
"Large surplus economies should consider taking further steps to boost domestic sources of growth, while deficit economies should implement measures to improve competitiveness."
G20 labour ministers held a joint session with finance ministers earlier, putting the jobs crisis in Europe - where youth unemployment is above 50% in debt-strapped Greece and Spain - at the centre of the debate.
The communique pledged to boost jobs and growth via a "comprehensive" series of reforms to raise employment and productivity.
The G20 also backed a fundamental tax rethink that takes aim at the loopholes used by multinational firms and responds to widespread anger among voters hit with higher tax bills to cover soaring national debts.
The group endorsed a tax action plan drawn up by the Organisation for Economic Co-operation and Development (OECD) that said the existing system didn't work, especially when it came to taxing companies that trade online.
The plan is one of the major 'deliverables' that will go to the St. Petersburg summit hosted by President Vladimir Putin.
