SEMINAR REPORT
Moderator: Geoff Cutmore, CNBC
Speakers:
Agustín Carstens, General Manager, Bank of International Settlements
Nadia Calviño, Minister of Economy and Business, Spain
Ray Dalio, Co-Chairman and Co-Chief Investment Officer, Bridgewater Associates
Kristalina Georgieva, Managing Director, IMF
Zhu Min, Chair, National Institute of Financial research, Tsinghua University
Escalating trade tensions are taking a toll on the global economy. Many central banks have appropriately lowered interest rates, but there are limits to this strategy. What other options do policymakers have?
Key Points:
Trade tensions. The panelists saw a timely resolution of the ongoing trade tensions as critical to boosting global growth. Georgieva noted that reversing the trade measures recently imposed could increase global GDP by 0.8 percent and removing the associated policy uncertainty could provide even larger gains.
Policy mix. The panelists concurred that monetary policy space was close to reaching its limits and called for more active use of fiscal and structural policies. Georgieva emphasized that fiscal policy actions needed to be mindful of the available fiscal space and debt vulnerabilities. Dalio thought that in the current environment of low growth, low inflation, and low interest rates, policy coordination would be critical. Calviño supported stronger communication between fiscal and monetary policy makers. If carefully managed, Carstens did not consider such cooperation as a risk to central bank independence.
Monetary easing and financial risks. Carstens noted that while further monetary policy measures could provide some boost to short-term growth, they could lead to losses later on, as lower interest rates and search for yield by investors would inevitably lead to a rise in financial vulnerabilities.
Structural reforms. Panelists viewed structural reforms, particularly those targeted at boosting productivity, as fundamental for increasing long-term growth in both emerging markets and advanced economies. Zhu noted that for China addressing structural issues was as important as resolving trade tensions. Georgieva emphasized that as more structural issues, including inequality or climate change, were becoming macrocritical, the Fund would increase its focus on assisting members addressing them.
Quotes:
“Of course there is a way to stop the synchronized slowdown, but for that there needs to be a will to act“ Kristalina Georgieva
“The real challenge we are facing right now is the Japanese style situation of low interest rates, low growth, and low inflation.“ Min Zhu
“If you are in the business of making money, you actually want to make money, which is why we see more risk-taking, because the normal pathway to make money is not delivering anymore.“ Kristalina Georgieva
“I would not say the European economy missed an opportunity, rather we could not avoid being affected by trade tensions and financial instability.” Nadia Calviño
“Our real challenge is how we are dealing with each other. There is enough money to go around, but we need coordination and the ability to rise above individual interests. “Ray Dalio
Contributor: Veronika Sola
