Higher Global Growth Predicted By IMF

January 22nd, 2014 by James

The International Monetary Fund is expecting global growth to pick up this year. The global lender however remarked that deflation is a “rising risk” as long as economic growth stays below what policy-makers believe is optimal.

Currency exchange board

Concerns were expressed by IMF Managing Director Christine Lagarde about price growth remaining below the target of many central banks that may hurt the nascent recovery.

“If inflation is the genie, then deflation is the ogre that must be fought decisively,” Lagarde said at the National Press Club in Washington.

Lagarde also added that central banks should be careful in withdrawing monetary stimulus, only once the economy is clearly on a firm footing. Last month, the US Federal Reserve decided to trim its monthly bond purchases to $75 billion from $85 billion and two of the U.S. central bank’s most hawkish policymakers said that it should bring its bond-buying program to a swift close. The so-called “taper” of the Fed’s bond buying was not expected to roil markets as long as it was gradual, Lagarde said. “We don’t anticipate massive, heavy and serious consequences,” she said.

Lagarde however remarked that more rapid adjustments may cause sharp market gyrations and volatile capital flows that would hit some emerging markets in particular. “Overall, the direction is positive, but global growth is still too low, too fragile, and too uneven,” she said.

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