American Thinker
Rick Moran
The managing director of the Inernational Monetary Fund, Christine Lagarde, sees big changes coming to the global economy.
The global economy is experiencing "transitions on an epic scale", the International Monetary Fund managing director said on Thursday, warning that turbulence in emerging markets could knock 0.5 to 1 percentage point off their growth.Christine Lagarde's remarks show the damage done to emerging markets by a recent round of "taper talk", over the possibility of the US Federal Reserve slowing the pace of its asset purchases and their vulnerability to future changes in the pattern of global capital flows.
"The immediate priority is to ride out the turbulence as smoothly as possible," said Ms Lagarde. "Currencies should be allowed to depreciate. Liquidity provision can help deal with dysfunctional market behaviour. Looser monetary policy can also help."
But she warned that countries with inflationary pressures - such as Brazil, India, Indonesia and Russia - have less scope to use monetary policy and that high debt and deficits mean many developing countries have little space for fiscal stimulus either.
"Overall, the global outlook remains subdued," said Ms Lagarde, in her traditional speech ahead of the annual World Bank and IMF meetings in Washington next week. "In many of the advanced economies, however, we are finally seeing signs of hope. Growth is looking up, financial stability is returning, and fiscal accounts are looking healthier."
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