The International Monetary Fund (IMF) has called on countries to limit their debts and work together to pursue sustainable economic growth that benefits everyone. The IMF held its annual meeting in Indonesia in recent days. It was overshadowed by the turmoil in the financial markets and the trade war between the US and China.
The tensions between the two largest economies in the World threaten to affect economic growth. The IMF began its meeting a few days ago with the announcement that it adjusted its forecast for global economic growth from 3.9 to 3.7 percent.
Due to the risks to the world economy and the large debt pile, IMF director Lagarde called on countries to “de-escalate and consult” on trade. According to her, countries must ensure that the level of their debts is manageable.
Do not devalue!
IMF members agreed not to devalue their currency in order to make their products cheaper and to stimulate exports. The US has repeatedly accused China of this practice.
At the meeting, Yi Gang, director of the Chinese Central Bank, said protectionism and tensions between trading partners were major risks for the World Trade. The American Minister of Finance Mnuchin said it was all too bad. He also says he is not worried about the possibility that China will sell more American debt paper to strike back because of the US import duties imposed.
Politicians apply pressure on CB’s
The president of the European Central Bank Draghi warned of the trend that political leaders increasingly interfere with the policy of central banks and referred to Turkey. President Erdogan has expressed himself several times about what he thinks of rate hikes and threatened to limit the freedom of funds movement of the banks.
Another president who has clearly expressed his opinion about the interest rate policy of his central bank is Trump. He said this week that the FED, the system of central banks in the US, went crazy after stock prices had gone down. Trump has in the past regularly referred to rising stock prices, which he thinks is the proof that his economic policy works.
Trump and Chinese President Xi are likely to meet at a G20 summit in Buenos Aires next month, but a conversation between the two is not yet certain. Mnuchin said that it depends on Trump and that the US fundamentally disagrees with China’s economic policy.
Peretz M. is an accomplished economist and financial journalist with a deep understanding of the global economy and financial markets. He is a regular contributor to EconomicInform, where he provides expert analysis and commentary on current economic trends and events. With a strong educational background in economics, Peretz has a talent for breaking down complex economic concepts for a general audience and is able to provide insightful perspectives on a wide range of economic issues.