Fri, Mar 13, 2015 - Page 15 News List

IMF’s Lagarde sees ‘better news’ headliney

EUROPEAN REBOUND?Lagarde said the low price of oil, a rise in the US dollar and the lower cost of investment mean that the eurozone is now starting to ‘turn a corner’

AFP, BERLIN

IMF managing director Christine Lagarde, left, and German Chancellor Angela Merkel laugh during a news conference in Berlin on Wednesday.

Photo: Reuters

IMF managing director Christine Lagarde on Wednesday said that major advanced economies were seeing “better news” thanks to cheap oil, currency shifts and low interest rates that encourage investment.

“For once in a long time there are clearly some relatively better news on the horizon of the advanced economies; and this has not happened in a while,” she said in Berlin.

“We clearly have a rebound of the US economy, an improvement and good growth showing in the UK, and the euro area is also now turning the corner,” Lagarde said at a joint press conference with German Chancellor Angela Merkel and the heads of the World Bank, the WTO, the International Labour Organization and the Organisation for Economic Co-operation and Development.

For the long-struggling eurozone, she said: “We have had a good result, better than expected, during the fourth quarter” and signs that “European growth is probably going to turn better than expected,” adding that this contrasted with “slower growth than expected in the emerging market economies. This is the case in China, deliberately so, it is certainly the case in Russia.”

She said the low price of oil has different impacts on different countries but was considered by the IMF “as a net positive for the global economy.”

On currency markets, there had been “an appreciation of the [US] dollar and a depreciation of the yen and the euro which is clearly having an effect on the export activities of those countries,” she said, while economies benefited from “the low cost of financing” brought by very low interest rates.

“So we’ve got three factors that are acting as boosters to the global economy and particularly to those advanced economies that combine the benefit of lower price of oil, currency valuations ... and lower cost of investment,” she said, adding that there are “risks on the horizon,” pointing to geopolitical turmoil including the Ukraine crisis, and the diverging monetary policies of major economies.

“We will also have risks stemming from the monetary policies that we are seeing at work,” Lagarde said. “We will probably expect a return to more traditional monetary policy by the [US] Fed {Federal Reserve}, while at the same time we have continued or renewed accommodative monetary policies by Japan and the European Central Bank.

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