JUST a week after turbulence hit financial markets in China, hitting investor confidence around the world, today the International Monetary Fund released a downbeat note about global economic growth. The IMF pointed to a slowdown in growth across both advanced as well as emerging economies in the first half of 2015, and warned that financial turmoil, slow productivity growth and falling commodity prices will dampen prospects for the rest of the year.
Still, the note appears to be sending out a more striking message to policymakers than investors, telling the Federal Reserve and the Bank of England, the two central banks closest to raising interest rates, to hold off any hikes for a little longer. The Bank of England’s rate-setters are due to gather on September 10th, and Janet Yellen will chair the Fed’s next meeting on September 16th. Both are currently considering raising rates for the first time since the financial crisis. But the IMF believes that “in most advanced economies substantial output gaps and below-target inflation suggest that the monetary stance must stay accommodative”. Or, in other words, rates need to stay lower...Continue reading
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