DAVOS, Switzerland, Jan 24 (Reuters) - Policymakers participating in a panel at the World Economic Forum at Davos on Friday spoke about the global economy. Following are highlights of their comments.
On risks for 2014:
"Obviously for us, Europe will be key ... another key risk is really financial markets, so when suddenly we have a loss of confidence again, (as a safe haven) that could put us again in a very difficult situation."
Asked about global risks in 2014, he doesn't expect deflation in euro zone:
Kuroda said the euro zone economy has bottomed out and could grow 1 percent plus in 2014, then accelerate.
"Although some economists argue that there is a danger of the euro zone going into deflation I don't think it's likely, partly because the economy is picking up and also because inflation expectations are fairly well anchored around 2 percent."
On challenges for 2014:
"The main external risk for the United Kingdom is still the very weak economies on the continent (Europe) ... not universally weak but there are still far too many of them."
"In China ... there's a lot of good talk there about economic reform ... I think we all just now want to see that delivered by the new Chinese government."
On global exit from non-standard monetary policy measures:
"The fact that the exit is unsynchronised this time around. That is good in some ways as there is no vacuum cleaner effect ,.. but you might have more volatility in exchange rates."
Risk of complacency:
"I worry about macroprudential complacency", citing a list of recent economic crises that the world failed to predict.
"Much greater emphasis needs to be placed on making a system that is safe for ignorance and error."
Re possible anti-bubble initiatives this year:
"That is a call for the Financial Policy Committee of the Bank of England ... Everyone is focused on interest rate moves but there is a whole range of tools" in the BoE arsenal.
On Brazil economic growth:
"(2 pct growth in Q3) is not good enough and we need to do more."
Forward guidance not a failure:
"I completely reject that forward guidance has been a failure."
On size of the bank's balance sheet:
"The size of the balance sheet is a consequence of monetary policy so a central bank should not worry too much about the size of the balance sheet."
On Swiss franc policy:
"You have to be careful not to have too many conditions with forward guidance in order not to confuse markets ..."
"We are in a complex situation, Switzerland and especially the Swiss franc remains a safe-haven currency, so we had this massive appreciation and we had to introduce the minimum exchange rate and there we need a very simple and very clear policy. So a clear message to the market is absolutely essential for the success of such a policy."
"I would say there is no free lunch."
The UK fiscal deficit is still high and you cannot promote investment "at the expense of credible fiscal policy."
"One of the things we need to do is to convince businesses we have got credible frameworks and then I think investment will flow."
"...I think we are beginning to see investment" in the UK. He cited Chinese investments, UK nuclear power and fracking plans.
On the forward guidance "wobble":
"I think you are being unfair to the Bank of England." What the MPC is now facing is "the challenge of success".
On whether QE tapering started too soon and could be reversed:
"All central banks always are data dependent and the Federal Reserve has certainly made clear that its trajectory of policy will be data dependent.
"And certainly the range of variation we've seen in unemployment in both the U.S. and UK ... reminds us that historical relationships in economics are way short of iron laws and that policy inevitably will involve discretion in response to events."
On quantitative easing:
"I can assure you that we have been discussing various options ... I think the Federal Reserve has managed this (normalisation) process fairly well."
"We are careful and we will manage ... this process ... without disrupting the market."
Start of Fed tapering positive:
"The beginning of Fed tapering has been "a net positive" for Brazil."
On quantitative easing:
"QE averted a 30s-style depression. The dog didn't bark." There was no wave of protectionism. But "the recovery has certainly not been everything most of us hoped."
"Are we capable of having an expansion that is both robust and sufficiently bubble-free to be sustainable?"
On Japanese sales tax hike:
"The sales tax hike does not create any additional problems to the Japanese economy because when we decided and introduced the new monetary policy framework last April ... at that time already the law to raise sales tax in two stages had been approved by the Diet. So when we decided the new monetary policy framework, we did take into account the temporary negative impact of such a tax hike on the economy."
"We introduced the new monetary policy framework ... to overcome the 15-year deflation and also the potential negative impact of the sales tax increase, and whatever kind of shocks are likely to affect the Japanese economy, and after nine months of implementing the QE the economy is on track."
On UK housing market:
Osborne says there is no problem in the housing market. Regarding the response of the Bank of England's MPC in the event of problems:
"If they see a problem in housing they have a range of quite subtle and targeted tools."
On Bank of England's forward guidance:
"Seven percent unemployment rate "is not a trigger for action it is a threshold"."