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The International Monetary Fund warns that risks to financial stability have increased.
IMF chief Kristalina Georgieva expressed this view in a speech in Beijing on Sunday.
It called for continued vigilance despite efforts by advanced economies to calm market stress.
The Managing Director of the IMF reiterated her view that 2023 would be another challenging year, with global growth slowing to below 3% on scars from the pandemic, the war in Ukraine and monetary tightening.
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Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). (Portal/Michele Tantussi/File Photo/Portal Photos)
The outlook for global growth in 2024 was better, but still below the historical average of 3.8%, and the overall outlook remained weak.
The IMF is expected to release new forecasts next month.
Georgieva said policymakers in advanced economies had responded decisively to risks to financial stability following bank failures, but continued vigilance was warranted.
“Therefore, we continue to monitor developments closely and assess potential implications for the global economic outlook and global financial stability,” she said, adding that the IMF pays close attention to the most vulnerable countries, and particularly low-income and high-income countries .
These shocks brought back memories of the 2008-2009 financial crisis.
FDIC Representatives Luis Mayorga and Igor Fayermark speak to customers outside the Silicon Valley Bank headquarters in Santa Clara, California, U.S. March 13, 2023. (Portal/Brittany Hosea-Small/Fox News)
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The banking crisis began when the FDIC shut down Silicon Valley Bank, the 17th largest in the country, as regulators moved to protect customers as it faced a liquidity crisis after a $2 billion loss.
It was the biggest bank failure since the financial crisis.
Federal regulators also shut down New York-based Signature Bank to protect consumers and the financial system in the wake of SVB’s collapse.
Flagstar Bank, a subsidiary of New York Community Bank, bought Signature’s deposits.
Major US banks have voluntarily pledged $30 billion to stabilize First Republic Bank.
In Europe, UBS took over Credit Suisse.
The Fed leads the way with a 25 basis point rate hike, signaling a determination to fight inflation
Federal Reserve Chairman Jerome Powell speaks during a press conference following a Federal Open Market Committee (FOMC) meeting on Wednesday, March 22, 2023 in Washington, DC, USA. The Federal Reserve hiked interest rates by a quarter PE… (Photographer: Al Drago/Bloomberg via Getty Images/Getty Images)
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The Fed’s tightening monetary policy has been cited as the main culprit for recent bank failures.
At its most recent meeting, the Federal Reserve announced another 25 basis point rate hike, ending speculation that the storm brewing in the US banking sector would prompt the central bank to ease monetary policy.
The rate hike brings the federal funds rate to a target range of 4.75% to 5%, the highest level in 15 years.
Portal contributed to this report.