Global Economy Risks Long Period of Low Growth, IMF’s Lagarde Warns

09-Apr (Wall Street Journal) — The head of the International Monetary Fund warned Thursday that the era of low interest rates risks fueling asset bubbles around the world. At the same time, she called for more central bank easing given an even bigger risk: the prospect of a long period of weak global growth.

Christine Lagarde, managing director of the International Monetary Fund, said policy makers are failing to take appropriate action to spur output, putting the global economy at risk of getting stuck in a long period of low growth.

IMF Managing Director Christine Lagarde said the global economy risks a protracted economic slowdown as policy makers fail to take appropriate action to spur output.

“Today what we must do is avoid that [the] new mediocre becomes the ‘new reality,’” Ms. Lagarde said in a speech to the Atlantic Council ahead of next week’s semiannual meetings of the IMF and World Bank. “All policy space and levers must be utilized,” she said.

While global growth is running at roughly the average of the last three decades, Ms. Lagarde said that isn’t enough to surmount stubbornly high jobless rates, hefty debt burdens and stagnating growth in several of the world’s largest economies.

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PG View: So there are risks of asset bubbles, but “all policy space and levers must be utilized” to combat weak global growth.