adminThe head of the International Monetary Fund (IMF) has warned of the risks of deflation to world’s economic recovery despite a rising growth in the global economy.
“Momentum strengthened in the latter half of 2013, and should strengthen further in 2014 – largely due to improvements in the advanced economies,” Christine Lagarde said in a speech at the National Press Club in Washington yesterday, AFP reported.
Lagarde pointed out, however, that deflation in the advanced economies threatens to derail this fragile recovery, requiring central banks in the US and Europe to keep easy money flowing.
“With inflation running below many central banks’ targets, we see rising risks of deflation, which could prove disastrous for the recovery,” she said.
“Global growth is still too low, too fragile, and too uneven,” the head of the IMF noted, adding, “If inflation is the genie, then deflation is the ogre that must be fought decisively.”
Deflation encourages people to wait for prices to fall further, leading to a reduction of personal consumption and a decline in investment because it can increase the real cost of borrowing.
Lagarde’s projections echoed the optimism expressed earlier in the day by the World Bank, which said the global economy was at a “turning point” but “remained vulnerable.” – Presstv.
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