Sat, Dec 08, 2018 - Page 10 News List

US economy not likely to contract in near term: IMF


Despite some uncertainty and market volatility, the US is not likely to see an economic contraction in the near term, IMF managing director Christine Lagarde said on Thursday.

On a day when Wall Street dropped 3 percent before recovering some ground, Lagarde said that “there’s a question mark about growth prospects going forward,” but the concerns are “a little bit overdone.”

“I don’t see the elements of recession in short order,” she said on CNBC, adding that the IMF is forecasting 3.7 percent global growth next year, which “is not bad.”

However, she said the US Federal Reserve was “probably going to slow down” its rate increases as it looks at economic data.

The central bank has raised its benchmark lending rate three times this year and is widely expected to do so again on Dec. 19, but has signaled that might slow or even pause next year as the US economy loses some steam.

Lagarde declined to make a recommendation to Fed policymakers, but said that its moves would depend on “their reading of the state of the economy” and should be “well communicated,” as US monetary policy has an impact on economies worldwide.

Asked about the impact of a tariff battle between the US and China, Lagarde said that if it stopped now, the direct hit to their economies would be “minimal.”

However, she warned that “if you add the indirect damage, if you’re factoring confidence, market apprehension and uncertainties... then you’re talking about much more than that.”

The Washington-based crisis lender has calculated that an escalation of the trade dispute could cut eight-10ths of a point off global growth by 2020, she said.

However, a truce between the US and China gave reasons for optimism and the 90-day time frame was enough to establish a framework for further negotiations, she said.

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