Lagarde says IMF forecast for global growth to be tilted to 'downside'
THE INTERNATIONAL Monetary Fund will trim its forecast for global growth this year, managing director Christine Lagarde said yesterday.
Without disclosing the size of the planned adjustment, Ms Lagarde, speaking in Tokyo, said the IMF’s current growth forecast of 3.5 per cent, due to be updated in the middle of July, would be “tilted to the downside”.
“It is not an enormous variation, but it will be negative,” said Ms Lagarde.
She pointed to near-simultaneous interest rate cuts in China and Europe on Thursday, along with the Bank of England’s boost to an asset-purchase programme, as evidence of the fragility of the global recovery.
However, she expressed hope that the European Central Bank’s action on deposit rates in particular – cutting the interest rate on its overnight facility to zero – could help to “stimulate interbank lending, which has not been as active as it should be”.
The IMF’s more cautious stance reflects the fears of central banks in Europe and Asia that loosened monetary policy to try to tackle sluggish global growth.
The Bank of England’s decision to pump another £50 billion into the ailing British economy, already in a shallow double-dip recession, shows its concern about the chilling impact of the euro zone crisis.
Ms Lagarde also paid tribute to the fiscal consolidation efforts of Japanese prime minister Yoshihiko Noda, who has succeeded in passing a bill to raise the country’s consumption tax in two stages, from 5 per cent to 10 per cent, by 2015.
“The IMF has always supported this measure,” she said. “A reasonable rate of taxation applied to a very large base is a good, solid way to address fiscal consolidation needs.” – (Copyright The Financial Times Limited 2012)