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David Lipton, the acting IMF chief, has backed new monetary stimulus by the world’s top central banks to sustain the flagging global economy — in a thinly veiled nod to the US Federal Reserve and the European Central Bank as they consider easing policy.
In an interview with the Financial Times as G7 finance ministers and central bankers prepare to meet this week in France, Mr Lipton said that “in light of sluggish growth and downside risks, it makes sense for monetary policy in the major central banks to remain accommodative”.
Mr Lipton said he did not want to comment on specific decisions in individual countries, but added that central banks should not shy away from loosening policy — if it was justified — because of fears of losing ammunition to combat a future downturn.
“Our view is that if the economy needs support, you provide support — but not inappropriate policies that contribute to the slowdown, just in order to be in a position to fight the very slowdown that has been created,” he said.
Mario Draghi, ECB president, recently signalled the eurozone may move to strengthen its commitment to low interest rates or even resume bond purchases to tackle weak inflation, while Jay Powell, the Fed chairman, has indicated the US central bank might cut rates as early as this month because of “uncertainties” in the outlook.
The IMF in April downgraded its forecast for global growth this year to 3.3 per cent, but predicted a rebound to 3.6 per cent in 2020.
“We see some acceleration next year but that presupposes a few very important things, including that trade tensions continue to be resolved rather than intensify, and that a number of countries that had extreme stress recover somewhat,” Mr Lipton said, … Read More...