UPDATE 2-Global economy still needs support – U.S. Treasury

* U.S. Treasury: don’t pull economic stimulus too quickly

* Brainard: different paces for different nations

* Brainard says watching China yuan moves closely
(Recasts first paragraph, updates with additional comments)

By Glenn Somerville

WASHINGTON, July 26 (BestGrowthStock) – Nations must not pull back
too quickly on economic stimulus because the global recovery
still needs support, a top U.S. Treasury Department official
said on Monday.

“The pace of exit strategy has to be carefully calibrated.
We have to be careful not to have an overly accelerated
withdrawal,” Treasury Under Secretary Lael Brainard told the
Peterson Institute for International Economics, a Washington
think tank.

Weighing in on a topic that has exposed differences between
the United States and Europe, Brainard said that differences in
the speed at which countries shifted from stimulus to restraint
shouldn’t overshadow the broad consensus that existed on fiscal

Spending to combat the 2007-2009 financial crisis and prop
up teetering economies has left large piles of government debt
around the world.

Last week, European Central Bank President Jean-Claude
Trichet said industrialized countries needed to come up with
plans now on how to rein in deficits that could jeopardize
their economies.

The Obama administration has pushed measures to increase
support for the U.S. economy in the near term, while vowing to
pivot quickly once the recovery is on more solid ground.

“Different countries need to make judgments about how
steeply to pull back stimulus based on national circumstances
as well as global conditions,” Brainard, the Treasury’s point
person for international affairs, said. “And that provides
ample fodder for talk of division and divergence.”

“Precisely at what juncture the balance (from stimulus to
restraint) shifts from one to the other will vary depending
upon the different economies,” she said.

Asked repeatedly to assess the European bank stress tests
that were published last week, Brainard said they had provided
“very detailed information bank by bank on exposure” to risk
and said that will help stabilize financial markets by
increasing transparency about the sector’s health.

The test results had offered “a materially greater level of
coverage and disclosure than previously”, she said.


Brainard also told the group that the U.S. Treasury still
considered China’s yuan currency to be undervalued, but she
declined to estimate by how much.

Some U.S. trade groups and lawmakers argue the yuan is
undervalued by anywhere from 10 percent to 30 percent, giving
China an unfair trade advantage.

Brainard said Beijing’s recent move to end a peg between
the yuan and the dollar showed China was letting market forces
play a greater role. But she emphasized that the U.S. Treasury
was closely monitoring how much it appreciated.

“What matters to us is how far and how fast” it rises
against the dollar, she added, echoing language Treasury
Secretary Timothy Geithner has used. The yuan has climbed 0.69
percent against the dollar since Beijing announced it was
unshackling it from a peg on June 19. [ID:nTOE66P07D]

Brainard also said the United States wants to see its trade
partners enact standards for financial market regulation that
are comparable to those signed into law last week by President
Barack Obama.

She said convergence of global rules was vital for some
issues, like setting capital standards and dealing with
derivatives markets. But in other areas it was possible to work
out common principles to guide different approaches among
nations, she added.

Tougher global capital standards for banks was crucial,
Brainard said.

“More and higher quality capital must be at the core of our
efforts to ensure a more resilient financial system,” she said.
“And the new standards must be harmonized internationally to be
effective domestically.”
Stock Market Trading

(Editing by Paul Simao)

UPDATE 2-Global economy still needs support – U.S. Treasury