IMF’s gloomy words speak more than a thousand forecasts | Business News
You can really get a better sense of the mood at the International Monetary Fund (IMF) by not looking at their latest forecasts, but by the kind of vocabulary they’re using around them.
Words like “ominous”, “dangerous” and “critical vulnerability” are quite synthetic. The IMF is very worried about the state of the global economy and its underlying financial system.
Worries can be separated into short-term and long-term.
In the short term, the IMF thinks that central banks are stuck in a dilemma. On the one hand, core inflation looks significantly more stubborn than previously expected.
The cost of living crisis could last longer than expected, causing real economic damage around the world.
On the other hand, efforts to control inflation (through higher interest rates) run the risk of creating problems of their own.
The downfall of Silicon Valley Bank earlier this year (and, to some extent, the UK government bond market last autumn) were both driven in part by rising interest rates.
That leaves central banks with a tense challenge – on the one hand, trying to tackle the cost of living crisis could actually cause more financial explosions.
On the other hand, holding back on rate hikes could cause inflation to “penetrate”, which could be even worse for everyone.
The long-term concerns are deeper. The fund is worried about a weakening global growth outlook. Its latest long-term projections for the world are the weakest they’ve ever had.
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According to the IMF, the “worrying” concern is that this is a sign that the lingering shadow of protectionism is starting to take its toll on global growth.
Countries around the world, including the United States, are pouring money into their industries in an effort to lure businesses back to their home countries, bringing production facilities they once moved to Asia. repatriation.
That sounds positive for some US businesses (they’re being subsidized anyway) but it could also lead to a less efficient, less productive world.
Put it all together and it makes for a worrisome outlook for the world economy.