The global economy is showing clear but tentative signs of a recovery from the sharpest downturn of the post-World War II period as policymakers around the world responded with a series of unprecedented actions, one of the key officials of the International Monetary Fund said.
The signs are clear-if still tentative-of renewed growth, although opinions are divided regarding how effective specific policy actions have been, or about how soon the global economy will regain the pre-crisis level of output, or reestablish pre-crisis trend growth rates, John Lipsky, First Deputy Managing Director of IMF, wrote in the iMFdirect blog on the agency's website on Monday.
He stated that central banks across the world are unlikely to increase their borrowing costs for some more months.
With inflation threats distant, there is little doubt that central bankers intend to keep policy interest rates very low for some time to come.
The blog was posted two days after Lipsky participated in the annual conference of global central bankers, officials and leading economists in Jackson Hole, Wyoming, organized by the Federal Reserve Bank of Kansas City.
At the conference, policymakers, who included Fed Chairman Ben Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa, were of the view to continue current monetary stimulus and they stand ready to act further, if needed.
Without any doubt, the mood in Jackson Hole was more upbeat than it would have been even a few months ago. Policymakers and central bankers can see that global growth prospects are reviving, and they sense that their actions are bearing fruit, Lipsky wrote.
In July, the Washington-based international lender had said the global economy is beginning to pull out of a recession, but stabilization is uneven and the recovery is expected to be sluggish. The IMF forecasts the global economic activity to expand 2.5% in 2010 after contracting 1.4% in 2009.
Lipsky said the recovery will remain inhibited until financial markets return to more normal functionality. While there are positive signs - such as the rapid improvement in some emerging market debt and equity markets - many key securitization markets are still impaired. Moreover, public sector aid to financial markets and institutions remains very large, but it is intended that this support will be temporary, he added.
The IMF official asserted that the private sector should support assumed implementation of a set of substantial policy actions to materialize positive growth prospects for the coming year.
Further, he said improvements in private spending is necessary to establish a sustainable recovery. Lipsky noted that higher household saving rate in the U.S. would hamper emerging Asian economies, most of which are export-reliant.
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