On Wednesday, the IMF (International Monetary Fund) issued a statement about the expected challenges to the global financial system. The statement has indicated that these risks have increased over the past 6-months. It can show further increase as Britain leaves the European Union without agreement and increasing trade tensions between the United States and China. The IMF started has started its spring meetings with the World Bank in Washington. The statement also pointed out that the world economic growth was slowing and any hasty slump could have the worst impact.
The IMF also warned against reversing preventative regulations that could help protect the financial system in case of worsening. The Global Financial Stability Report of the IMF said, “There is a risk that the positive sentiment of investors will deteriorate abruptly, leading to a severe financial crisis. This will have a greater impact on economies with weak fundamentals, greater financial vulnerability, and narrower policy space to cope with shocks”. It is noteworthy that the IMF cut its global growth forecast on Tuesday to its lowest level since 2016 and considered its 3rd-cut forecast since October.
Wednesday report said the IMF warned a more severe slowdown than expected could lead to a worsening in financial conditions. The IMF urged policymakers to clearly announce changes in their monetary policy positions to reduce market volatility. The fund has indicated that trading in the U.S and European markets was consistent as the authorities were having issues negotiating a deal that would ensure an orderly exit of Britain from the European Union. The IMF also warned that a prolonged standstill threatens to destabilize financial markets. It will destroy the confidence of investors and reflect a negative impact on corporate investment. The Fund said trade-related sectors had boosted around the world on expectations of a positive outcome of U.S-China trade talks.