IMF chief warns of weak growth, lure of protectionism Fed may change stress tests, says Yellen

Christine Lagarde, the International Monetary Fund’s managing director on Wednesday renewed warnings against protectionism and trade restrictions, saying that the global economy risked prolonged low growth and that advanced economies faced painful inequality.

Lagarde said the current global recovery was still fragile following the Great Recession of 2008-2009 and that populist political currents rising in the developed world threatened to undo the progress made.

“For the past several years, the global recovery has been weak and fragile and this continues to be the case today,” Lagarde said in prepared remarks delivered at Northwestern University, near Chicago. “Especially for advanced economies — while there are some good signs the overall growth outlook remains subdued.” “We continue to face the problem of global growth being too low for too long, benefiting too few,” she said.

Lagarde spoke ahead of next week’s annual meetings of the IMF and World Bank, at which development bankers gather to discuss global efforts at poverty reduction. The topics she raised were The Federal Reserve is considering changes to the annual stress tests it gives US banks to move to a more risk-sensitive, firm-specific approach that would raise capital requirements for big banks based on their test results, according to its chair, Janet Yellen. Testifying at a House of Representatives Financial Services Committee hearing on Wednesday, Yellen said the Fed is “now considering making several changes to our stress testing methodology and process.” The stress tests aim to prove that individual banks can withstand a massive financial crisis. likely to be front and centre at the conclave.

Her words also echoed the IMF’s message in recent weeks.

Ahead of the Group of 20 summit in China earlier this month, Lagarde warned that high debt, weak demand, eroding work forces and labour skills were weakening incentives for investment and slowing productivity, threatening to create what she called a “low growth trap.”