IMF / LAGARDE US ECONOMY

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06-Jun-2019 00:02:44
The International Monetary Fund (IMF) upgraded the growth forecast for the US economy but warned that trade tensions pose a risk to that momentum. IMF

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STORY: IMF / LAGARDE US ECONOMY
TRT: 2:44
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: 06 JUNE 2019, WASHINGTON, DC

SHOTLIST:

1. Wide shot, IMF Managing Director Christine Lagarde and AEI Resident Fellow Desmond Lachman walk-up to stage
2. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“Our assessment is that the economy will grow this year at about 2.6 per cent percent and next year at around two per cent. And this represents an increase from our initial growth forecast by point 3 percent so lots of positives and a lot to be proud of on the economic front and the economic indicators are saying so.”
3. Med shot, reporter
4. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“Over the first few months of this year financial market conditions have improved markedly. This is good for near-term growth reducing the cost and increasing access to financing but obviously we are concerned about the risk of an abrupt reversal of financial market conditions that could represent a material downside risks in the US and in particular a sudden tightening of financial conditions could interact adversely with the high level of private public corporate households and sovereign debt and could create a feedback loop that could also weigh on real activity and job creation.”
5. Med shot, reporters
6. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“As you know earlier this year the Federal Reserve has indicated that it was pausing its process of raising interest rates. We fully agree with that approach and believe that this will give policymakers time to gorge the balance of risks to both inflation and employment outcome.”
7. Med shot, reporter
8. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“We believe that for the global economy to actually function well, it needs to be able to rely on a more open, more stable, more transparent, more predictable and rules based international trade system.”
9. Med shot, reporter
10. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“It will be essential for the US and all its trading partners including the likes of China Mexico and others to agree on a new system to agree to eliminate the distortions that put a brake on growth.”
11. Med shot, reporters
12. SOUNDBITE (English) Christine Lagarde, Managing Director, International Monetary Fund (IMF):
“As I've said many times, nobody wins a trade war and everybody suffers.”
13. Wide shot, Lagarde exiting stage

STORYLINE:

The IMF upgraded the growth forecast for the US economy but warned that trade tensions pose a risk to that momentum, Managing Director Christine Lagarde said today ( 6 Jun) in Washington.

The Fund released its annual economic review of the United States, called an Article 4 consultation showing that economic activity will grow this year and in to 2020.

Lagarde told reporters, “our assessment is that the economy will grow this year at about 2.6 per cent and next year at around two percent. And this represents an increase from our initial growth forecast by point 3 per cent so lots of positives and a lot to be proud of on the economic front and the economic indicators are saying so.”

One of the big risks would be if a tightening of financial conditions led to a ‘feedback loop’ undermining confidence and investment.

She said, “over the first few months of this year financial market conditions have improved markedly. This is good for near-term growth reducing the cost and increasing access to financing but obviously we are concerned about the risk of an abrupt reversal of financial market conditions that could represent a material downside risks in the US and in particular a sudden tightening of financial conditions could interact adversely with the high level of private public corporate households and sovereign debt and could create a feedback loop that could also weigh on real activity and job creation.”

The IMF continues to urge the Federal Reserve to remain data-dependent on its rate decisions.

Lagarde said, “as you know earlier this year the Federal Reserve has indicated that it was pausing its process of raising interest rates we fully agree with that approach and believe that this will give policymakers time to gorge the balance of risks to both inflation and employment outcome.”

Lagarde said that while the effects of trade tensions had not sparked inflation at this point, if threatened tariffs and trade restrictions are allowed to be enacted and kept in place it will inevitably lead to lower growth and higher prices passed to consumers.

She said, “we believe that for the global economy to actually function well it needs to be able to rely on a more open, more stable, more transparent, more predictable and rules based international trade system.”

She added, “It will be essential for the US and all its trading partners including the likes of China Mexico and others to agree on a new system to agree to eliminate the distortions that put a brake on growth.”

Lagarde had a simple message for all, “as I've said many times, nobody wins a trade war and everybody suffers.”
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