By Steven K. Beckner

(MNI) – The letter to the Group of 20 which President Obama
co-signed Monday makes no mention of the Federal Reserve or other
central banks, but the message seems loud and clear: don’t withdraw
monetary stimulus.

The letter, released Tuesday, warns that the global economy remains
“fragile” and stresses the need to stay focused on promoting growth and
job creation. No mention is made of inflation risks.

For its part, the Fed still seems in no mood to tighten monetary
policy anytime soon.

Although some of the Fed rhetoric has begun to sound a bit more
upbeat, the Fed’s policymaking Federal Open Market Committee recently
reiterated its expectation that the near zero federal funds rate will be
kept “exceptionally low … for an extended period.” And Fed Chairman
Ben Bernanke echoed that sentiment in Congressional testimony last week.

But going forward various Fed officials have cautioned against the
Fed being subjected to political pressure to hold interest rates down
when the time comes to tighten credit.

Bernanke has participated with his fellow central bank governors
and finance ministers in past G-20 meetings and will be meeting with
them again on April 23 in Washington and in Busan, South Korea June 3-5.

The G-20 leaders are scheduled to hold “summits” in Toronto June
26-27 and in Seoul Nov. 11-12.

In preparation for the Toronto meeting, Obama, Canadian Prime
Minister Stephen Harper, British Prime Minister Gordon Brown, French
President Nicolas Sarkozy and South Korean President Lee Myung-Bak sent
a letter to their G-20 counterparts.

The letter, which comes on the heels of a “Sherpas” meeting in
Ottawa last week, should not necessarily be construed as putting
political pressure on the Fed and the other major central banks.

In fact, the letter doesn’t even mention monetary policy per se.
Nevertheless, it does seem to send a subtle but unmistakable message
that the monetary authorities should not be considering rate hikes
anytime soon.

The letter notes that past G-20 “efforts have succeeded in
stimulating a recovery of the global economy and avoiding a total
breakdown of the financial system.”

“But our task is not yet complete,” it says. “The nascent recovery
in the world economy remains fragile.”

“Current strains illustrate the continuing risks to global economic
and financial stability,” the letter continues. “It is vital that we, in
a spirit of enlightened self-interest, continue to work together to
achieve our mutual objectives in addressing new and emerging risks,
safeguarding stability, and supporting a robust return to growth and job
creation in all our economies.”

“Our goal must be to strengthen the global financial system and
build a stronger global economy rooted in sustainable growth and
prosperity for all,” the letter adds.

** Market News International **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MI$$$$,M$X$$$,M$C$$$,M$A$$$,M$$CR$,M$$BR$]