Global finance ministers and central bankers pledged to use all their tools, including fiscal policy, to support demand amid a ‘highly uncertain’ outlook and elevated risks, reported Bloomberg.
The International Monetary and Financial Committee, said, “The outlook is highly uncertain and subject to elevated downside risks, including trade tensions, policy uncertainty and geopolitical risks.”
“We will employ all appropriate policy tools, individually and collectively, to mitigate risks, enhance resilience and shore up growth to benefit all,” said International Monetary and Financial Committee.
The downbeat statement caps a week during which the IMF made a fifth-straight cut to its 2019 global growth forecast, projecting the weakest expansion since 2009. The IMF’s Chief Economist, Gita Gopinath, warned that there is no room for policy mistakes and an urgent need for policy makers to cooperatively de-escalate trade and geopolitical tensions.
“All tools can be applied—monetary policy where there is space for it as well as fiscal measures and structural reforms when appropriate,” said Kristalina Georgieva, the IMF Managing Director.
In the US, the Federal Reserve has reversed some of its tightening to insure against downside risks, though consumer spending has largely held up amid weakness in manufacturing and business investment. China also announced last week that economic growth decelerated to the weakest pace since the early 1990s, yet it may be starting to stabilise as fiscal stimulus works its way through the economy.
For the euro area, policymakers do not expect to go beyond the interest-rate cuts and quantitative easing pushed through by European Central Bank President Mario Draghi in September unless the economy is hit by shocks such as escalating trade tensions or a no-deal Brexit.
While the US and China have touted progress toward a trade agreement that leaders Donald Trump and Xi Jinping would sign next month, the situation remains uncertain and there is no indication that the nations are preparing to roll back tariffs implemented over the past two years.