New IMF economist sees major challenges to global economy

This Oct 6, 2015 IMF file photo shows International Monetary Fund (IMF) Economic Counselor Maurice Obstfeld as he answers questions during the World Economic Outlook press conference at the 2015 IMF/World Bank Annual Meetings in Lima, Peru. An early interest rate hike by the US Federal Reserve would involve

He said incentives need to be changed to favor emissions reduction, including essentially putting a tax on carbon. That “would be the most efficient way to reduce emissions at the lowest cost,” he said.

“Unfortunately, many countries, especially the United States, don’t want to put in taxes. But that’s really the efficient way to do it.”

At the same time, Obstfeld has his eye on US plans to tighten monetary policy even while elsewhere, including Japan and the EU, central banks need to loosen theirs, he said.

He said the US Federal Reserve, expected to raise interest rates in December for the first time in nine years, might be better holding off a little longer.

The risks of the Fed acting sooner “are certainly higher,” he said, adding: “I don’t see huge risks at all to waiting.”

“If for any reasons the Fed had to reverse that first interest rate increase, markets would interpret it as a big deal.”

As for the Fed’s counterpart in the eurozone, he said the European Central Bank “should be following the strategy of expanding asset purchases and lowering the interest rate.” higher risks than would waiting a bit longer, the chief economist of the International Monetary Fund told AFP on Nov 10.

‘I’m not sure that the risks of acting are gigantic, but they’re certainly higher,’ said Maurice Obstfeld, in an interview. ‘I don’t see huge risks at all to waiting.’ (AFP)