“They’re softening their position, but it’s a little late in the day”.
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The IMF staff’s analysis also suggests that insurance companies, hedge funds, and other managed funds contribute to overall financial risks in an amount larger than suggested by their size, and therefore deserve greater attention.
A continued weakening of growth in the rest of the world could suppress U.S. exports and investment in tradable sectors. The official gave the briefing on condition of anonymity.
Reserve Bank of India governor Raghuram Rajan has been the most vocal on the need for developed market central banks to consider worldwide spillovers in their monetary policy decisions.
Anxious that a Greek default might trigger a European banking crisis, the fund’s board agreed in 2010 to waive a cornerstone of IMF bailouts which required that Greece’s debt be sustainable.
“A shift in expectations about the future pace of rate increases could create flows into U.S. dollar assets and a further meaningful appreciation of the dollar”, it added. As it turned out, Greece plunged into a much deeper recession than anticipated, with unemployment surging to about 25 per cent in 2012.
Still, Greece had no choice but to narrow its budget deficit to restore confidence in the economy, the person said.
The fund has placed blame on a succession of governments over the past five years failing to deliver on promised economic overhauls and take ownership for a bailout that Athens helped craft.
The International Monetary Fund says that the inability of the Congress and the Executive Branch to collectively pass a budget and corresponding appropriations bills creates a level of fiscal uncertainty that is damaging to the USA economy.
The Fund though is not likely opposed to such a solution, since it needs to answer to its member states who provide the money for its rescue programs.
The Fund found that the dollar is already moderately overvalued. The current one, Christine Lagarde, is a French ex- politician, as was her predecessor, the socialist sex-maniac Dominique Strauss-Kahn.
There’s evidence that “herding behavior” among USA mutual funds is intensifying, particularly in less liquid markets, the IMF said.
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Many economists had forecast a rise in September, although recent economic and jobs data had dampened expectations.
