Chief of the Indian Monetary Fund (IMF), Christine Lagarde has warned against repercussions of the US tax cuts, stating that the economic stimulus may lead to a rapid rise in interest rates that would weigh on countries with high debt levels. Speaking to a French radio station France Inter, Lagarde said that the IMF was going to be “attentive” to the consequences of the reform. Several key stock markets lost around 10 per cent last week in a brutal correction that she said, was “inevitable”.
Lagarde said the US tax reform “will operate like a kind of stimulus on the current economic situation” in the US which was already experiencing “strong” growth. “You have to ask yourself whether this will not result in rising wages, rising prices, and therefore, rising inflation and whether, consequently, there is a risk of a reaction by the monetary authorities, notably in the form of interest rates rising a little faster or a little more frequently.” She said this, in turn, would have “an impact on all of the world's economies, especially on heavily indebted economies.” Adding, “We believe that we must be attentive to what is going on, especially in the United States.”
