IMF: Threat to world economy: financial conditions tightened too soon by central banks

The Managing Director of The International Monetary Fund (IMF) at a luncheon meeting today made the following remarks:

The greatest danger to the world economy in the near future is that governments and central banks may tighten financial conditions too soon.

The cleansing of the financial system must be be completed or another financial crisis is very likely, and the financial sector will not be bailed out again.

Inflation risk is low.

If the unemployment situation is not addressed successfully, there will likely be social and political unrest. He specifically mentioned Hungary, Pakistan and Ukraine.

Financial regulatory and supervisory reform is essential.

One of the most serious dangers to future economic growth is the decline of U.S. consumption as the engine of that growth. It is not clear what other market could replace the U.S. A balance between stimulating consumption and repair of the fiscal situation in the light of huge fiscal deficits will be difficult.


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