IMF cautions about risks arising from big financial market bets
The International Monetary Fund warned investors about risks stemming from big market bets financed by borrowed amounts.
The International Monetary Fund warned about serious hazards for the global economy coming from big financial market bets; they could unravel very fast, should investors become scared of geopolitical tensions or due to US interest rate policy shifts.
The Washington based IMF is the most dutiful watch over global financial and economic stability. In its report it is outlined that despite the bumpy start of this year, it expects an improvement in economic growth in the second half of 2014.
Along with the optimistic note, the IMF also underscored that on the basis of financial market indicators, it could be concluded that investors’ bets financed with borrowed funds seem “excessive”; thus fast market deflation could occur if any surprise developments take place in US monetary policy or in the conflict torn areas of the Middle East and Ukraine. The IMF report was drawn up for the Group of 20 meeting attended by finance ministers and central bankers to be held in Australia over the weekend.
The US central bank assured it intends to keep interest rates around zero for a long time to come, but once again stated concern regarding the labor market slack. However, public statements have been made by some Fed officials, who have said the Fed should be prepared for more imminent and faster rate raise, compared to financial markets’ expectations, on the background of predominantly good news on US economic development.
