- IMF Managing Director Kristalina Georgieva told CNBC: “We are not yet seeing a significant slowdown in lending.”
- Stressing that the world economy is in an “exceptionally uncertain environment,” Georgieva said: “Be aware of trends and be flexible, adjust – should the trends change.”
- A majority of major global central banks, including the US Federal Reserve, have tightened monetary policy aggressively to curb rising inflation.
Georgieva says she had to work “twice as hard” to be equal to her male colleagues.
Drew Angerer/Staff/Getty Images
The International Monetary Fund has yet to see enough banks pull back on lending that will cause the US Federal Reserve to change course with the rate hike cycle.
“We are not yet seeing a significant slowdown in lending. There is some, but not on the scale that would cause the Fed to pull back,” IMF Managing Director Kristalina Georgieva told CNBC’s Karen Tso on Saturday in Dubrovnik, Croatia.
The Federal Reserve in a banking report in May warned that lenders are concerned about conditions ahead, as problems at mid-sized US financial institutions prompted banks to tighten lending standards for households and businesses.
The Fed’s lending officials added that they expect problems to continue over the next year due to reduced growth forecasts and concerns over deposit outflows and reduced tolerance for risk.
Georgieva told CNBC: “I cannot stress enough that we are in an exceptionally uncertain environment. So be aware of trends and be flexible and adjust — should the trends change.”
The IMF’s comment on the pace of a decline in global lending comes after chief economist Pierre-Olivier Gourinchas told CNBC in April that banks are now in a “more precarious situation” that will pose a risk to the international organization’s growth forecast for the world. 2.8% for this year.
A majority of major global central banks, including the US Federal Reserve, have tightened monetary policy aggressively to curb rising inflation. Meanwhile, the world’s global debt has risen to a near-record high of $305 trillion, according to the Institute of International Finance. The IIF said in its May report that high debt levels and interest rates have led to further concerns about leverage in the financial system.
Since the IMF has yet to see a significant slowdown in lending that would prompt the Fed to reverse course, Georgieva said that combined with a robust US jobs report on Friday, it could increase further.
“The pressures coming from incomes rising and unemployment still being very, very low means the Fed has to stay the course and maybe in our view they might have to do a little bit more,” she said.
She forecast that the US unemployment rate would go above 4%, up to 4.5%, from more rate hikes by the Fed after interest rates rose to 3.7% in May, the highest since October 2022.
As the US government passed a debt ceiling bill signed by President Joe Biden over the weekend, she said: “what has been agreed, in the context [that] there was agreement, is mostly a good result.”
“Where the problem lies is that repetitive debate about the debt ceiling, in our view, is not very useful. There is room for rethinking how to go about it,” she added.
— CNBC’s Jeff Cox, Elliot Smith contributed to this report