London - A Group of Seven statement designed to cool international currency tensions should be taken at face value and it was regrettable that others tried to reinterpret it, the Bank of England's chief said on Wednesday.
G7 nations - Britain, the United States, Japan, Germany, France, Italy and Canada - reaffirmed on Tuesday a commitment to market-determined exchange rates and said fiscal and monetary policies must be directed at domestic economies and not targeting exchange rates.
Japan quickly said the statement - released by Britain which chairs the G8 grouping (G7 plus Russia) this year - gave it a green light to continue efforts to reflate its economy.
But a G7 official responded by saying it was aimed squarely at Tokyo, a comment that prompt the yen to surge on a volatile foreign exchange market.
“What that statement means is when countries take measures to use monetary stimulus to support growth in their economies, then there will be exchange rate consequences and they should be allowed to flow through,” Bank of England Governor Mervyn King told a news conference.
“In the short run if you want to allow countries to stimulate growth, you have to allow them to take the measures of a monetary or other kind which will have consequences on the exchange rate, and we should let floating exchange rates take them where they will.
“When I put my name to that statement yesterday, I didn't expect that other so-called officials will be out there giving unattributable briefings, both before and after the statement, trying to claim that the statement said what it didn't say.” - Reuters