IMF’s Lagarde predicts modest growth, but warns of deflation
January 16, 2014 | By Brooke C. Stoddard | email@example.com
Christine Lagarde, managing director of the International Monetary Fund (IMF), offered a mix of optimism and precaution in a speech at the National Press Club on Jan. 15.
Lagarde said she hoped 2014 would mark the end of the recession that dogged the world economy for seven years and usher in seven years of economic strength.
Such growth “requires a sustained and substantial policy effort, coordination, and the right policy mix," she said.
Even as the global economy shows signs of improvement risks remain, Lagarde said. Deflation is a possibility that should be “fought decisively,” she said.
Lagarde also noted that emerging market economies, which accounted for three-fourths of global growth during the five years of advanced-economy troubles, were slowing, and that there are “risks [there] arising from financial market turbulence and the volatility of capital flows.”
Stability is vital and that the “big priority in 2014 is to fortify the feeble global recovery and make it sustainable,” Lagarde said. She cautioned that central banks in advanced economies should return to “more conventional monetary policies only when robust growth is firmly rooted.”
In Europe, Lagarde called for “targeted lending” to “reduce financial fragmentation.” She praised Japanese leader Shinzo Abe for his “Abe-nomics,” but called for deregulation and increasing participation of women in the workplace.
In emerging markets, Lagarde cautioned against financial excesses such as asset bubbles and rising debt, while calling for better infrastructure and less burdensome regulation. She said she was heartened by progress in Asia and sub-Saharan Africa, and she called for firm support from the international community for Arab countries, which most notably needs jobs for their young people.
Answering questions, Lagarde said she hoped that the exclusion from the recent congressional budget of reforms the IMF has been calling for since 2010 is “only a matter of timing” and not a rejection of the work and principles of the IMF.
Lagarde welcomed the budget deal by the Congress because shutdowns and debt ceiling threats created uncertainty.
Lagarde, a French lawyer, tamped down on rumors that she might run for president of France.
“I am very happy in my job as managing director of the IMF," she said.