Hazardous low interest rate policy: IMF warns of new world financial crisis – n-tv.de NEWS

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 Thursday 09 April 2015

 
 
 

 
 The head of the IMF, Christine Lagarde, looks a big risk for a new serious financial crisis. The situation in Europe and the US is improving though – but after ailing economies you do not have to look far .
 

 
 
 

The head of the International Monetary Fund (IMF), Christine Lagarde, has warned of the danger of a new global financial crisis. “The risks to global financial stability to take” the Frenchwoman said in Washington. Problems could cause low or even negative interest rates as well as dramatic exchange rate fluctuations mainly.

Also grow the world economy is still too slow, Lagarde said in a speech overlooking the IMF Spring in the coming week. The global gross domestic product will rise this year, about the same rate as in 2014, when the increase was 3.4 percent. “The global recovery continues. But she is mixed and uneven.”

While the development is satisfactory in major economies such as the US and the UK and the euro zone is recovering, see it in some developing and emerging countries worse. Especially in Russia, Brazil, and many parts of the Middle East there are economic problems. India, China and Africa south of the Sahara were in no better there.

Danger by low interest rates

The loose monetary policy in the euro area and Japan would be helpful for economic development, said Lagarde, mountains but also dangers. “It promotes a higher risk tolerance of investors.” This could result in overheated markets. Low interest rates may jeopardize the solvency of life insurance and pension funds with guaranteed payout amounts.

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The strong exchange rates may also be a risk for countries that high debt have foreign currencies, Lagarde said. Especially emerging markets, which also suffered from low commodity prices and would fear possible interest rate increases on loans could be in trouble.

“The risks may be individually handled, but we also need a structural decline in liquidity (ie, be the withdrawal of capital, d. Red.) finished, “Lagarde said. Therefore, governments must arm themselves with consequent reform and stricter rules for a capital deduction and prevent excessive risk-taking by investors.

  Source: n-tv.de
 

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