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IMF meeting dominated by growth concerns - Deutsche Bank

FXStreet (Łódź) - Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank recounts the highlights of the IMF meeting in Washington last weekend.

Key quotes

"Worries over global growth, especially in Europe, dis-inflation and secular stagnation came out in style."

"However timing is everything in financial markets and had this mass gathering been held 2-3 weeks ago it probably would have been dominated by how US growth was going to de-couple from the rest of the world and ultimately drag everyone else up by the bootlaces."

"In response to all these growth fears, the central bankers in Washington generally responded in dovish terms over the weekend. The one that stood out was perhaps comments from Fed’s Vice Chairman Stanley Fischer who said that 'if foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise'."

"As for other dovish sound bites, Fed Governor Daniel Tarullo speaking at an IIF conference said that he is worried about global growth and noted 'there are more downside risks than upside risks' which is 'obviously something we have to think about in our own policies'. Chicago Fed’s Evans also said that a strengthening of the USD and weak growth aboard could mean slower inflation in the US and less justification for the Fed to hike rates."

"Away from Fed officials there was also more debate around what is the right policy for Europe - in particular the mix between monetary and fiscal policies."

"Draghi said that ECB’s balance sheet expansion is the last monetary tool left to revive inflation. Draghi reiterated his EUR1trillion target but this was met by some opposition by Bundesbank’s Weidmann who said that a target value isn’t set in stone."

”Indeed Germany looks rather isolated when it comes to policy prescriptions for Europe. Draghi’s call for easier fiscal policies from European countries (that can afford to) was opposed by Germany’s Finance Minister Wolfgang Schaeuble earlier last week who continues to emphasise on fiscal discipline and structural reforms across Europe."

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