G20 showdown likely over US Federal Reserve’s quantitative easing
Angela Merkel expected to lead opposition in Seoul to Bernanke’s QE2 programme
Sunday 7 November 2010
President Barack Obama can expect a rough ride at the G20 summit in South Korea this week after China and Germany denounced plans by the Federal Reserve to flood the US economy with cheap money.
Ben Bernanke, the Federal Reserve chairman, was this weekend forced to defend the decision to pump an extra $600bn (£372bn) into the ailing US economy over the next eight months in an attempt to accelerate growth. “We’re not in the business of trying to create inflation,” said Bernanke, to counter criticism that the flood of money will fuel price rises.
As the G20 prepared to meet, campaigners for the Robin Hood tax on financial transactions stepped up their lobbying effort, urging leaders to support the tax, which would help to plug deficits and reduce the need for cuts to public spending.
Bernanke said: “Our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we all agree would be a worse outcome. I have rejected any notion that we are going to raise inflation to a super-normal level in order to have effects on the economy.