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World Bank,

IMF at odds

WASHINGTON

The contrasting views over capital controls come amid rising tension between emerging and developed economies over exchange rates, which are expected to be a hot topic at the G7 finance ministers’ meeting starting today.

Western leaders are worried efforts by emerging economies to weaken their currencies could derail the fragile recovery in the West. But officials from the developing economies argue that ultra-low interest rates in rich countries are fuelling massive fund flows into the emerging markets, pushing up currencies there, as well as inflating prices of stocks, property and other assets.

World Bank President Robert Zoellick said emerging nations should consider various measures to control short-term capital flows, according to a report yesterday in the

But IMF Deputy Managing Director Naoyuki Shinohara told

Also yesterday, the European Central Bank (ECB) held its benchmark lending rate at a record low of 1 per cent for an 18th straight month.

Near-record low borrowing costs for nations across the euro region’s periphery are making it harder for the ECB to wean commercial banks off the cheap cash it provided to fight the financial crisis.

The euro was up 0.5 per cent against the greenback at US$1.4000 after the ECB decision. — Emerging economies should consider steps to contain fund flows that could cause currency rallies and asset bubbles, the World Bank chief was quoted as saying, but the International Monetary Fund (IMF) called such actions “undesirable”.Nikkei business daily.Reuters it was natural and welcome for money to shift into economies with strong growth and policymakers should not try to curb such flows or use intervention to defend specific currency targets.AGENCIES