WASHINGTON – Threats to the global economy have lessened, International Monetary Fund chief Rodrigo de Rato told a gathering yesterday at the Peterson Institute for International Economics, according to the Associated Press.
“I do not think that the risks are greater than they were six months ago. Actually, I think they are a little lower,” the IMF’s managing director said. But he also called for continued vigilance, saying “Central banks around the world have established credibility in taming inflation … but the risk that political events could disrupt the global economy remains.”
Recent trends of “questionable lending and borrowing” also endanger the world economy, de Rato said. “If political leaders don’t think global imbalances are important, or are complacent about financial market developments, it is more difficult to persuade them to take the actions needed to sustain global prosperity,” he added.
In a report released today in Washington, D.C., the IMF identified the recent rise in delinquencies at U.S. subprime lenders as one of several current risks to the world economy, but said it is unlikely to cause a “major dislocation” in the broader market for mortgage-backed securities, Bloomberg News reported.
Other risks identified in the Global Financial Stability Report include the “massive” increase in U.S. leveraged buyouts, the rising flow of capital to emerging markets and imbalances in global trade and finances.
The IMF report added that the increasing globalization of banks brings advantages and disadvantages, Bloomberg said; it strengthens individual banks, allowing them to spread their risks, but it increases linkages between markets, increasing the risk a problem will spread. “Supervisors need to collaborate ever more closely in the oversight of cross-border institutions,” the report said.
The report was released in conjunction with the twice-yearly meeting of policymakers from the IMF’s 185 member nations, who are slated to convene next weekend in Washington.
