IMF Warns About Growing Risks to Global Economy

Risks to the global financial system are rising once again eight years after the last crisis struck, a leading watchdog warned yesterday.

The International Monetary Fund used its twice-yearly Global Financial Stability Report to issue a series of warnings about fragility around the world amid ‘a moderate and uneven global economic recovery’.

It highlighted the threat of higher interest rates in the US, a Greek exit from the eurozone, weakness among European banks, and wild swings on currency markets and in the oil price.

The IMF, lead by Christine Lagarde , pictured, also said risks are ‘rotating’ away from banks to shadow banks and from advanced economies to emerging markets.

‘Risks to the global financial system have risen since October and have rotated to parts of the financial system where they are harder to assess and harder to address,’ said Jose Vinals , financial counsellor at the IMF, as he launched the report in Washington . He said the first interest rate rise in the US could set off turmoil in the financial markets as investors shift money from the rest of the world to America.

The Fed is expected to raise rates later this year having frozen them at close to zero since the depths of the Great Recession.

The prospect of higher interest rates has driven the dollar higher against currencies around the world – creating more volatility in major exchange rates than at any time since the financial crisis.

‘The dollar has strengthened more against major currencies during the past nine months than it has during any similar period since 1981,’ said the IMF report.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza