April 10 - Central banks keeping their easy monetary policies in place is a good idea, says International Monetary Fund Managing Director Christine Lagarde, with little improvement in global growth expected this year. Conway G. Gittens reports.
Global growth is likely to remain tepid this year, the head of the International Monetary Fund, Christine Lagarde, said on Wednesday. SOUNDBITE: CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "After particularly volatile period, financial conditions are showing signs of improvement. You, of course, have noticed. Thanks to the actions of policy makers, the economic world no longer looks quite as dangerous as it did nine months ago. Yet, we do not expect the global growth to be much higher this year than last year." During a speech at the Economic Club of New York, Lagarde stressed that central banks should keep their easy monetary policy in place. Pointing to the U.S. as a model, Lagarde highlighted improving conditions in the financial system, the recovery in the housing market, lower household debt, better credit conditions, and increasing employment. But cautioned the situation is still far from perfect. SOUNDBITE: CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "An outstanding issue is that public finances appear unbalanced. Adjustment is too aggressive in the short-term, and way too timid in the medium term. This adds to uncertainty and it causes a shadow on the recovery. So the shadow is not behind, it's ahead of us. Yet, you will say 'the fiscal cliff has been avoided.' But this year fiscal adjustment is still in our view, outsized." SOUNDBITE: CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "At this point in the recovery, it is more important than ever to put in place credible, medium-term road map to bring down the debt, a balanced plan that will be based on saving and entitlement spending, plus additional revenues. Such a plan would, in our view, will support recovery and private demand." But she's worried current improvements are not yet showing up in the real economy and gave this observation to central bankers around the world. SOUNDBITE: CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND (ENGLISH) SAYING: "The crisis has been long, hard and bitter on many. And the priority, as we see is an improvement in the financial sector, I mean markets tell us at the moment, is to actually take advantage of that moment, when the right policies have been taken particularly by central banks, to make sure that others will also take the baton so that central banks not have to shoulder so much of it. That breathing space is now. And this is the moment. We cannot afford to just let it go." Lagarde is preparing for IMF, World Bank and G20 meetings next week in Washington.