Don’t see elements of recession in near-term: Lagarde

Published December 7, 2018
IMF chief Christine Lagarde believes the US Federal Reserve is "probably going to slow down" its rate increases as they look at economic data. ─ AFP/File
IMF chief Christine Lagarde believes the US Federal Reserve is "probably going to slow down" its rate increases as they look at economic data. ─ AFP/File

WASHINGTON: Despite some uncertainty and market volatility, the United States is not likely to see an economic contraction in the near term, IMF chief Christine Lagarde said on Thursday.

On a day when Wall Street has dropped more than two percent, Lagarde said “there’s a question mark about growth prospects going forward” but the concerns are “a little bit overdone.”

“I don’t see the elements of recession in short order,” she said on CNBC, and the IMF has forecast 3.7 per cent US growth next year which “is not bad.”

However, she said the Federal Reserve was “probably going to slow down” its rate increases as they look at economic data.

The US central bank has raised its benchmark lending rate three times this year and is widely expected to do so again on December 19 but has signaled that it may slow or even pause next year as the economy loses some steam.

Lagarde declined to make a recommendation to Fed policymakers but said their moves will depend on “their reading of the state of the economy,” and should be “well communicated” since US monetary policy has an impact on economies around the world.

Asked about the impact of the tariff battle between the United States and China, Lagarde said if it stopped now the direct hit to their economies would be “minimal.”

But she warned that “if you add the indirect damage if you’re factoring confidence, market apprehension and uncertainties...then you’re talking about much more than that.” The Washington-based crisis lender has calculated that an escalation of the trade war could cut eight-tenths of a point off global growth by 2020, she said.

But she said the weekend truce between the US and China gave reasons for optimism and the 90-day time frame was enough to establish a framework for further negotiations. However, with complex issues like intellectual property rights, “it’s going to take a long time.”

Published in Dawn, December 7th, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Border clashes
19 May, 2024

Border clashes

THE Pakistan-Afghanistan frontier has witnessed another series of flare-ups, this time in the Kurram tribal district...
Penalising the dutiful
19 May, 2024

Penalising the dutiful

DOES the government feel no remorse in burdening honest citizens with the cost of its own ineptitude? With the ...
Students in Kyrgyzstan
Updated 19 May, 2024

Students in Kyrgyzstan

The govt ought to take a direct approach comprising convincing communication with the students and Kyrgyz authorities.
Ominous demands
Updated 18 May, 2024

Ominous demands

The federal government needs to boost its revenues to reduce future borrowing and pay back its existing debt.
Property leaks
18 May, 2024

Property leaks

THE leaked Dubai property data reported on by media organisations around the world earlier this week seems to have...
Heat warnings
18 May, 2024

Heat warnings

STARTING next week, the country must brace for brutal heatwaves. The NDMA warns of severe conditions with...