IMF chief quotes Churchill as she warns of economic shocks
THE head of the International Monetary Fund has urged countries to reduce debt and slash red tape to revive growth, as she warned the world was becoming more vulnerable to economic shocks.
Kristalina Georgieva quoted Sir Winston Churchill as she urged governments to prepare for the next global crisis. “There is plenty to worry about,” she told reporters at the IMF Spring Meetings in Washington.
Her warning came as Megan Greene, a policymaker at the Bank of England, warned that Threadneedle Street risks plunging the UK back into recession if it cuts interest rates too soon.
Ms Greene echoed comments made by the IMF when she said a “stop-start” approach to setting interest rates “doesn’t tend to end well”. The IMF said “backpedalling” on rates would potentially be more damaging for financial markets and the wider economy. Ms Greene added that UK interest rates were likely to remain at 5.25pc “for a while”. She added: “Do I think it’s worse to do too much or too little [on interest rates]?
“I think doing too little is the bigger risk because you end up having to hike rates even higher and could end up triggering an even bigger recession.” Ms Georgieva urged countries to reduce debt as she warned that medium-term prospects for global growth were at their lowest in decades.
She said: “In a world where crises keep coming, countries must urgently build fiscal resilience. We know we will be tested again.” Quoting from a wartime speech Churchill made in 1940, she added: “This is no time for ease and comfort – it is time to dare and endure.”
She went on to warn that global debt levels were far higher than before Covid and compared the trajectory of global growth to a “Swiss ski slope” with prospects dimming every year.
Boosting growth, “strengthening governance, cutting red tape, increasing female labour market participation, and improving access to capital” were “essential for growth and … productivity”, Ms Georgieva said.
Speaking at the Atlantic Council in Washington, Ms Greene said inflation risked proving “more persistent” in the UK than other rich economies and UK wage growth of 6pc to 7pc and strong services-inflation, at 6pc, were too high.
“The numbers we’re seeing in terms of wage growth and services inflation just aren’t consistent with a sustainable 2pc inflation target, which we’re trying to hit.”