The International Monetary Fund has warned of continued risk to global financial stability despite an improved outlook for the world economy.
Speaking in Canada yesterday, IMF managing director Christine Lagarde said a sustained period of low inflation, the ripple effect of the US winding down its own QE programme and the knock-on impact of political tensions were the three key risks threatening global financial stability.
She said: “In the advanced economies, there is the emerging risk of “low-flation”, particularly in the Euro area. A prolonged period of low inflation can derail the incipient recovery—and suppress growth and jobs.
“In emerging market economies, there is the risk of renewed market volatility and rising financial instability associated with monetary normalisation in the U.S.
“Geopolitical tensions are rising. If not well managed, for example, the situation in Ukraine could have broader spillover implications.”
Lagarde said the global economy was “turning the corner on the Great Recession” but warned recovery remains patchy.