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IMF Georgieva Believes Without A Doubt More Stimulus Is Coming

Stimulus Trap
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EDITOR NOTE: The market may be on edge about the likelihood of a second COVID fiscal stimulus, but IMF boss Kristalina Georgieva has no doubts that it will eventually get passed. Seen by the IMF and the Federal Reserve as a much needed “positive,” the stimulus presents Americans with a dilemma; one that spares many Americans from the acute risks of falling off the poverty cliff in exchange for a steep climb in the cost of living as the dollar’s devaluation falls to new lows. There’s an irony here--the cost of your “wealth,” large or small, is the casualty of the dollar. Another metaphor--the monetary sustenance you’re being “fed by the Fed” is in varying states of decay.

Kristalina Georgieva, the managing director of the International Monetary Fund, told CNBC Thursday that she has “no doubt” the U.S. will implement a new economic stimulus package that will help reduce the current uncertainties for the global economy.    

The IMF boss said that the impact of a U.S. stimulus package would be much-needed positive whenever it’s introduced, adding that if it were implemented earlier it would “provide a boost to certainty and certainty is something we do need in this crisis.” 

Georgieva was speaking to CNBC’s Geoff Cutmore during an IMF World Bank panel on Thursday, alongside European Central Bank President Christine Lagarde, Indonesia’s Minister of Finance Sri Mulyani Indrawati and Ngozi Okonjo-Iweala, board chair of the Vaccine Alliance, known as GAVI. 

Georgieva said the U.S. Federal Reserve’s monetary policy, along with the government’s fiscal policy, were the “two levers” managing the U.S. economy and that it was “best if they are used together in combination.” 

“We have to recognize that in the first round of action that was done very effectively and of course, it would be highly desirable that the fiscal lever is also put in place,” she said.

In March, the Fed lowered interest rates to near-zero and launched a quantitative easing program of $700 billion to support the U.S. economy. That came alongside a fiscal hit of $2 trillion in what was called the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, which aimed to keep many American families and the economy afloat. However, a second fiscal package looks unlikely before the Nov. 3 election.

Negotiations between the Republican government and House Democrats have stalled over the amount of money that could be used to stimulate the U.S. economy. Earlier on Thursday, Treasury Secretary Steven Mnuchin told CNBC’s “Squawk Box” that while he and President Donald Trump were committed to getting a deal agreed, “politics” may be getting in the way. He said the Democrats still wanted an “all or nothing” deal. 

Trump has said he would raise his offer above the current level of $1.8 trillion, with the House Democrats having passed a $2.2 trillion bill.

Georgieva added on Thursday that there was still “a way to go with this crisis,” so room for fiscal support would be needed. “Thank God the U.S. has that fiscal space,” she said. 

This support wouldn’t just be necessary in the next couple of months but “down the road” — “so let’s see how quickly it would be deployed but I have no doubt it will be deployed because it is necessary,” she added.

Originally posted on CNBC

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