Ahead of the Group of 20 (G20) summit scheduled for July 7-8, 2017 in Hamburg (Germany), the International Monetary Fund (IMF) issued a note expressing several concerns described by its Managing Director Christine Lagarde as a recipe for a tough financial crisis.
Against the backdrop, the administration of US President Donald Trump and the partisan difficulties it faces in implementing his electoral promises and defining a coherent economic policy. By lowering the US economic growth forecast from 2.3% and 2.5% to 2.1% for both 2017 and 2018, the IMF stresses how predicting US policy is currently difficult.
Also, Christine Lagarde contradicts with the Fed’s Chair Janet Yellen who said recently that another financial crisis is unlikely in our lifetime. Moreover, the normalization of the Fed’s monetary policy could tighten the overall financial conditions especially if it takes place more quickly than expected.
In conclusion, the IMF has often made more pessimistic conclusions in recent years than the financial sector, central banks and even the World Bank. However its observation of some political inertia in the United States associated with the rise of geopolitical tensions in Asia do validate such warning.