The International Monetary Fund expects global growth to pick up this year, though deflation is a “rising risk” as long as economic growth stays below what policy-makers believe is optimal, the head of the Fund said on Wednesday.
IMF Managing Director Christine Lagarde expressed concern about price growth remaining below the target of many central banks, which could hurt the nascent recovery. “If inflation is the genie, then deflation is the ogre that must be fought decisively,” Lagarde said at the National Press Club in Washington.
An inflation rate that is well below the 2 percent targeted by some of the world’s major central banks carries risks in the longer term because it can deflate wages and demand, depressing the economy.
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