8 July 2010
“Growth forecasts in advanced economies can really decrease, if the wrong fiscal policy stifles the domestic demand”, – the IMF said.
“The most advanced economies shouldn’t tighten before 2011, because it may damage the fledgling recovery”, – the IMF warned.
The banking system:
There are already some indications that banks in Euro zone are tightening up their lending conditions. “If it’s really true, they could have a serious influence on the availability of credit to corporate”.
The IMF is also concerned about bank funding. The IMF believes the financial system reform should be immediately implemented.
Monetary conditions should remain the same in order to calm the financial market jitters, the IMF said.
“If the pullback is coming, monetary policy will take the first shot. In this case, with today’s very low interest rates, the central banks may need to again rely more strongly on using their balance sheets to further ease monetary conditions”.