Former head of the International Monetary Fund Christine Lagarde has warned that global growth is “fragile” and “under threat” and policymakers should work to reduce manmade vulnerabilities. Policymakers should work together to “try to reduce the fragility and ... resolve the uncertainty,” facing the global economy, she told in an interview on Thursday.
Lagarde, who officially stepped down as IMF managing director last week, decried certain self-inflicted wounds, saying that issues like Brexit and trade frictions “are manmade and can be man-fixed.” But Lagarde, who was the first woman to lead the crisis-lender and is set to become the first woman to take over the leadership of the European Central Bank later this year, said, “a bit of woman wouldn’t hurt.”
Her comments came on the day the OECD said trade tensions are eroding world growth, prompting it to cut its forecast for this year to the slowest rate since the start of the global financial crisis in 2008, just 2.9 per cent down from the 3.2 per cent expansion previously forecast.
President Donald Trump’s trade war with Beijing has undermined business investment and exports at a time when China’s economy already is shifting to slower growth. “What we have at the moment is a rather mediocre growth” which is “fragile and it is under threat,” Lagarde said.
She said central banks have done much of the heavy lifting, preventing the financial crisis from becoming a depression, but officials handling government policies and purse strings now must step up. “I think central bankers have done an awful lot and were for many years regarded as the only game in town,” she said.
In her new post leading the ECB, she said she would focus on job creation and stability, but stability alone may not be enough in the lives of real people. If confirmed, she will step into her new post in an environment where Trump has maintained a relentless campaign against the US Federal Reserve for not cutting interest rates aggressively to stimulate growth.
Trump has also accused outgoing ECB President Mario Draghi of deliberately seeking to weaken the euro to gain unfair trade advantages, something Draghi has refuted. Others in Europe have criticised Draghi for cutting rates further into negative territory to juice a sluggish EU economy.
But Lagarde said that experience shows that, in cases where politicians meddle with central bank independence, it “doesn’t pan out very well.” But she also said central bankers should strive to be “predictable.” “There is enough uncertainty around the world, not to add the uncertainty of what a central banker is going to do.” Central bankers “should deliver on their mandate and,” she said, “they should stick to facts and data so that they could be predictable.”