Global financial stability risks still on the rise: IMF
washington — Risks to the global financial system have grown over the past six months and could increase with a messy British exit from the European Union or an escalation of USChina trade tensions, the International Monetary Fund said.
The IMF, whose spring meetings with the World Bank begin in Washington, noted that the global economic expansion is slowing, and an abrupt downturn could have a far-reaching impact. The fund also warned against rolling back prudential regulations that could help to buffer the financial system in the event of a downturn.
“There is a risk that positive investor sentiment could deteriorate abruptly, leading to a sharp tightening of financial conditions,” the IMF said in its Global Financial Stability Report.
“This will have a larger effect on economies with weaker fundamentals, greater financial vulnerabilities, and less policy
There is a risk that positive investor sentiment could deteriorate abruptly, leading to a sharp tightening of financial conditions
IMF, Global Financial Stability Report
space to respond to shocks.” On Tuesday, the IMF cut its expectations for global growth to its lowest level since 2016. It marked its third downgrade since October. In Wednesday’s report, it cautioned a sharper-than-expected slowdown could spur tighter financial conditions.
In Wednesday’s report, the IMF urged policymakers to clearly communicate any changes to their monetary policy stances to minimise market swings. Noting investor sentiment had improved since the Federal Reserve paused its rate-hiking cycle, it warned that a strong shift in Fed policy could trigger a sell-off in riskier assets.