International Monetary Fund, World Bank Bring Global Financial System Risks to Light

The International Monetary Fund (IMF) and the World Bank are gathering this week to discuss the state of the global financial system, which has many worried because of emerging markets and heightened trade tensions. The meetings are held in Bali and include a review of current risks to the world’s financial well-being.

On Oct. 10, Reuters reported “easy financial conditions,” such as high debt levels and “stretched” asset valuations, are fueling economists’ concerns, following IMF’s report that tightening financial conditions have caused near-term risks to increase. While economies may not feel pressure at the moment, IMF capital markets director Tobias Adrian said in the article that high inflation could cause interest rates to skyrocket when least expected.

“In the report, the IMF said economic growth appears to have peaked in some major economies while the gap between advanced countries and emerging markets was widening,” Reuters states. “The IMF on [Oct. 9] cut its global growth forecasts due to an escalating U.S.-China trade war and growing financial strains on emerging markets.”

Economic conditions in the U.S. are holding strong, despite an interest rate increase by the Federal Reserve in September and another expected to follow in December. Meanwhile, slow conditions are seen in the euro area and Japan, Reuters noted, with moderate conditions in China—a status that could change depending on the country’s trade dispute with the U.S. The IMF recommends global regulators “keep in place measures” enacted during the financial crisis a decade ago as a precaution.

—Andrew Michaels, editorial associate