FX.co ★ Global economic concerns highlighted by IMF and World Bank

US President Joe Biden is confident in the strength of the American economy, a sentiment that is hard to dispute. Yet, some central bank governors and finance ministers have challenged this statement. While the American leader's position has a basis, it is not universally accepted as axiomatic. Notably, major officials, particularly representatives from the International Monetary Fund (IMF) and the World Bank (WB), have expressed concerns. They point to global leaders' worries about the growth of the American economy. Financial tensions are simmering, and the excessively high interest rates and a strengthening dollar could lead to serious issues. These conditions complicate monetary authorities' efforts to combat inflation, the agencies emphasize. IMF representatives believe that the US fiscal situation poses long-term risks to the financial stability of the global economy. Many economists anticipate further inflation growth due to the current policies of the Biden administration. A recent IMF report focuses on the growing US economy, revising the country's GDP growth forecast for 2024 up to 2.7%. However, Kristalina Georgieva, the managing director of the fund, noted this as indicative of a potential "overheating" of the American economy. Previously, Georgieva had expressed concern about the strengthening dollar. Questions arise from both the IMF and the WB on how long the Federal Reserve will remain inactive before it considers lowering the rate. Jerome Powell, the head of the Federal Reserve, recently stated that a cut in the US interest rate would be delayed due to high inflation indicators. This announcement triggered turmoil in the financial markets, leading to a global sell-off of government bonds and a record surge in yields. Amid these developments, there has been a notable decline in national currencies, including the Japanese yen, which fell to its lowest level since 1990 against the greenback. In response, monetary authorities in Japan and South Korea have expressed concerns. The Central Bank of Indonesia has also reacted by reducing large-scale dollar purchases. Meanwhile, Malaysia's government has warned of potential interventions.