MUMBAI (Reuters) – The United States will “push back very hard” against countries that target weaker exchange rates to gain an unfair trade advantage, Treasury Secretary Jack Lew said on Thursday, driving home concerns he expressed to the Group of 20 this week.
Speaking in India, Lew said the US economy had turned the corner but the rest of the world needed to do more to revive growth. He urged Europe to make greater use of fiscal policy to reinforce monetary stimulus to boost growth.
Lew’s remarks reinforced a message he gave to G20 finance ministers in Istanbul on Tuesday, but stopped short of naming any countries suspected of competitive currency devaluations.
The euro has weakened against the US dollar following the announcement of 1 trillion euros in stimulus measures by the European Central Bank, while China and commodity exporters, such as Australia, have also seen currency weakness of late.
In an interview with NDTV Profit, Lew drew a distinction between policies of quantitative easing, which seek to stimulate credit and growth, and those targeting the exchange rate to gain an “unfair trade advantage”.
“We have been clear, that kind of unfair policy is something that we will oppose and we will push back very hard on,” Lew told the financial news channel.
“It would be a very big mistake for the world to get into a situation where … there is kind of a race to devalue.”
He said the US economy had “turned a corner”, and was showing sustained growth in jobs, wage increases and a recovery in housing and manufacturing.
“What we have now in the US is the kind of recovery that will feed on itself and grow, but we can’t look at the US as if it is an island all by itself,” said Lew.
“So we are very much concerned that there needs to be more growth in other parts of the global economy as well.”
In contrast, Lew said, Europe was reluctant to use fiscal tools to lift growth because some countries did not have room to do so, while the continent faced “real challenges” to stabilise Ukraine and Greece.
“Having deployed the monetary policy tools, I think were Europe to use some of its fiscal space to grow demand, it would actually make monetary policy more effective,” said Lew. “It will help to get the economy moving.”
Lew spoke in Mumbai, the financial capital, on the first day of a two-day visit to India. He meets Finance Minister Arun Jaitley in New Delhi on Thursday, with a joint news conference to follow.