Sunday, January 3, 2016

Reuters: IMF's Lagarde warns about Global Growth in 2016

Even before we get to 2016, IMF Director Christine Lagarde is warning about dim prospects for global growth. She cites rising interest rates in the US as a concern along with a slowdown in China. Below are some quotes from her in this recent Reuters article.

"Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt published on Wednesday.
IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.
Added to that, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, she said.

"All of that means global growth will be disappointing and uneven in 2016," Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth."
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My added comments: If you were to ask me what are a couple of keys to watch for in 2016 I would say to watch how the election year in 2016 impacts things and watch to see if the US Fed becomes a scapegoat if the global economy does head south.
There will be enormous pressure on the Fed this year to keep the economy afloat. If it turns down it will clearly impact the US elections (Democrats will probably turn on the Fed and blame them for raising interest rates). Both the IMF and the BIS have issued warnings about the Fed raising interest rates as well. 
In my view the US Fed has the most to lose if things head south in 2016 so we can assume they will do anything in their power to prevent it if possible.

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