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Nusa Dua (Indonesia) (AFP) – IMF chief Christine Lagarde on Thursday defended central bank rate hikes in a veiled speech to Donald Trump after the US president accused the "crazy" policy of the Fed has contributed to the turmoil of the financial markets.
Lagarde spoke of the massive global market sales in Asia following Trump's comments, highlighting the growing financial volatility that the IMF will tackle during its annual meetings with the World Bank this week in Bali.
Lagarde said that central bank rate increases, such as those of the US Federal Reserve, which had defined policies, were justified by fundamental factors.
"This is clearly a necessary development for economies that are recording significantly improved growth, rising inflation … an extremely low unemployment rate," she said. during a press briefing in Bali.
"It is inevitable that central banks make the decisions that they take."
After a massive sale on Wall Street on Wednesday, Trump said the Federal Reserve "was making a mistake".
"I think the Fed has gone crazy," he said.
– Collect clouds –
Trump has repeatedly reiterated that the high Wall Street records prove the success of his policies, including a conflicting business strategy, and frequently criticized the Fed for its gradual rise in interest rates, which could dampen the markets. fellows.
The world's financial elite is on the Indonesian holiday island for a week of talks clouded by economic prospects.
An IMF report released on Wednesday said global growth could be threatened if emerging markets deteriorate further or trade tensions intensify.
The escalation of the tariff war with China and its disdain for global trading standards have largely dominated global anxiety.
But the rise in US interest rates has also helped to shift currencies emerging markets, while heavily indebted countries in dollars rush to repay their debts.
Lagarde told Bali that world leaders should repair global trading systems instead of tearing them down in response to rising nationalist and protectionist tendencies.
While defending rate hikes, Lagarde added Thursday that uncoordinated increases in advanced economies were destabilizing capital flows in emerging markets.
Combined with trade tensions, this has created "an unprecedented situation" for the global economy, she said.
"Clearly as a result of (rate hikes) … we see and will continue to see capital flow movements," she added.
"The fact that the major central banks of the advanced economies do not all evolve at the same rate is likely to accelerate this phenomenon."
– Economic tremors –
Trump has perceived or threatened to tax products from economies around the world, including China, but also from traditional allies such as the European Union.
The head of the World Trade Organization (WTO) warned that a "generalized trade war" could reduce trade by nearly 18% and affect global GDP, thus affecting the United States, the United States, and the United States. China and others.
Ms Lagarde announced that she would meet Pakistani officials on Thursday, in the hope that Islamabad is asking for a bailout in the face of the imminent balance of payments crisis. Prime Minister Imran Khan said this week that his country needs $ 10 billion to $ 12 billion.
"I suppose there might be a program request from them, but that has not been discussed and we will explore this this afternoon," she said.
On Tuesday, the IMF cut its global GDP growth forecast by 0.2 percentage points to 3.7 percent in 2018 and 2019, due to economic uncertainties.
The meetings opened following the Sept. 28 earthquake and tsunami on the island of Sulawesi, leaving more than 2,000 dead and possibly thousands more missing, highlighting the risks. of security weighing on Indonesia.
These risks were again highlighted early Thursday when a magnitude 6.0 earthquake shook parts of the islands of Java and Bali, including meeting places and hotels.
Three people were killed on Java when buildings collapsed.
No damage or casualties were reported in Bali, but the earthquake prompted the summit organizers to inform participants of what to do in the event of an earthquake.
