1 00:00:00,040 --> 00:00:03,440 Speaker 1: Now, IMF is seeing signs of progress in the global economy. 2 00:00:03,440 --> 00:00:06,560 Speaker 1: It's raised its global growth forecast for twenty twenty three 3 00:00:06,840 --> 00:00:09,440 Speaker 1: from two point eight percent in April to three percent 4 00:00:09,800 --> 00:00:13,480 Speaker 1: in its latest report. Joining us now is Pierre Olivier Grisha, 5 00:00:13,640 --> 00:00:16,640 Speaker 1: IMF Chief Economists. Thank you so much for joining us. Look, 6 00:00:16,800 --> 00:00:18,720 Speaker 1: I love what you write here. There are clouds on 7 00:00:18,760 --> 00:00:23,360 Speaker 1: the horizon and it is too early to celebrate. Tell 8 00:00:23,400 --> 00:00:26,880 Speaker 1: me what is the biggest threat to ruin the party here? 9 00:00:28,200 --> 00:00:31,600 Speaker 2: Well, the biggest threat remains inflation. We've had some good 10 00:00:31,640 --> 00:00:34,519 Speaker 2: news on output growth with revised affords a little bit. 11 00:00:34,560 --> 00:00:36,839 Speaker 2: I mean, there was quite a bit of resilience in 12 00:00:36,880 --> 00:00:40,199 Speaker 2: the global economy, but especially in the first quarter. But 13 00:00:40,320 --> 00:00:43,120 Speaker 2: you know, the momentum is slowing down, and this is 14 00:00:43,159 --> 00:00:44,839 Speaker 2: why at the end of the day, the revision is 15 00:00:44,840 --> 00:00:47,319 Speaker 2: not stronger than what it is and why we're going 16 00:00:47,360 --> 00:00:51,559 Speaker 2: into next year also with relatively modest growth. But behind 17 00:00:51,560 --> 00:00:54,600 Speaker 2: this what we're seeing is well, of course, headline inflation 18 00:00:54,760 --> 00:00:57,279 Speaker 2: is coming down because energy prices are coming down, but 19 00:00:57,720 --> 00:01:01,320 Speaker 2: below the surface, if you look at underlying core inflation, 20 00:01:01,880 --> 00:01:06,440 Speaker 2: it's proving more persistent, and that persistence is a real challenge. 21 00:01:06,480 --> 00:01:09,759 Speaker 2: It means that you know, central banks monetary policy needs 22 00:01:09,800 --> 00:01:13,480 Speaker 2: to remain in contractionery territory. It needs to weigh on 23 00:01:13,600 --> 00:01:17,360 Speaker 2: economic activity to bring inflation back back to target. So 24 00:01:17,400 --> 00:01:20,640 Speaker 2: that's clearly the main focus and should remain the main 25 00:01:20,640 --> 00:01:23,240 Speaker 2: focus going forward well, and. 26 00:01:23,200 --> 00:01:26,639 Speaker 3: The question remains, Pierre Levier, whether or not central banks 27 00:01:26,680 --> 00:01:29,720 Speaker 3: doing so. Keeping policy tight to get inflation back down 28 00:01:29,720 --> 00:01:31,720 Speaker 3: to target is ultimately going to come at the cost 29 00:01:32,000 --> 00:01:34,200 Speaker 3: of a recession. And as you talk about growth that 30 00:01:34,319 --> 00:01:37,920 Speaker 3: is moderating, even moderating growth is still growth. Take your 31 00:01:37,920 --> 00:01:40,360 Speaker 3: forecast for the US specifically, I believe one point eight 32 00:01:40,400 --> 00:01:43,280 Speaker 3: percent growth this year, one percent next year. Is it 33 00:01:43,319 --> 00:01:46,120 Speaker 3: your anticipation that we avoid a recession here, that the 34 00:01:46,160 --> 00:01:49,440 Speaker 3: FED can achieve the soft landing that is right, I. 35 00:01:49,440 --> 00:01:51,840 Speaker 2: Mean a recession is not in our baseline forecast at 36 00:01:51,840 --> 00:01:53,720 Speaker 2: this point. So it's a very narrow path, of course, 37 00:01:53,720 --> 00:01:55,560 Speaker 2: because when you get to a growth rate about one 38 00:01:56,120 --> 00:01:58,800 Speaker 2: percent for as we have for the US for next year, 39 00:01:59,200 --> 00:02:01,320 Speaker 2: you know, this is a fairly low growth rate and 40 00:02:01,520 --> 00:02:04,680 Speaker 2: it wouldn't take necessarily much of a shock, you know, 41 00:02:05,560 --> 00:02:09,760 Speaker 2: external shock, increasing energy price or whatnot to knock that 42 00:02:09,760 --> 00:02:13,800 Speaker 2: that trajectory of itself, its rails. So so here in 43 00:02:13,800 --> 00:02:16,440 Speaker 2: a sense, what we're saying is it's a narrow path, 44 00:02:16,480 --> 00:02:19,160 Speaker 2: but it's achievable. What we're seeing is slow down of 45 00:02:19,200 --> 00:02:22,040 Speaker 2: the economy. We're seeing good news on the inflation in 46 00:02:22,040 --> 00:02:24,239 Speaker 2: the sense that core inflation remains high, but it is 47 00:02:24,280 --> 00:02:27,840 Speaker 2: expected to decline. We're seeing monetary policy weighing down on 48 00:02:28,040 --> 00:02:31,320 Speaker 2: on on the economy overalls as it's expected to be, 49 00:02:31,360 --> 00:02:33,960 Speaker 2: as it needs to do, and so if we can 50 00:02:34,000 --> 00:02:36,640 Speaker 2: stay on that path, then we're avoiding hard landing. 51 00:02:38,120 --> 00:02:40,880 Speaker 1: What about Europe, You wrote that the Euro Area set 52 00:02:40,919 --> 00:02:45,400 Speaker 1: t to decelerate sharply. How sharp could that deceleration become? 53 00:02:45,560 --> 00:02:48,840 Speaker 1: Could we look not just a slight recession but a 54 00:02:48,840 --> 00:02:50,000 Speaker 1: more troubling recession. 55 00:02:51,600 --> 00:02:55,360 Speaker 2: Well, the slowdown in the Euro Area is certainly much 56 00:02:55,400 --> 00:02:58,639 Speaker 2: sharper we are We are projecting that growth will come 57 00:02:58,680 --> 00:03:02,080 Speaker 2: down from three point five last year to zero point 58 00:03:02,160 --> 00:03:04,400 Speaker 2: nine percent this year. So this is quite a bit 59 00:03:04,440 --> 00:03:07,799 Speaker 2: of a slowdown. But there's a lot of variation between 60 00:03:08,240 --> 00:03:11,440 Speaker 2: European economies when you look under the surface. Some of 61 00:03:11,480 --> 00:03:15,000 Speaker 2: the sharpest slowdown is in Germany, for instance, while some 62 00:03:15,160 --> 00:03:18,440 Speaker 2: economies like Italy or Spain are doing better than expected 63 00:03:18,840 --> 00:03:23,200 Speaker 2: and what's driving this is really how global demand has 64 00:03:23,240 --> 00:03:27,360 Speaker 2: been rotating away from goods and into services, including tourism. 65 00:03:27,440 --> 00:03:31,359 Speaker 2: So countries are big manufacturing countries like Germany are suffering more, 66 00:03:31,400 --> 00:03:34,960 Speaker 2: and countries that are tourist destinations are doing slightly better. 67 00:03:36,960 --> 00:03:39,840 Speaker 3: Okay, as you talk about services, Pierre Levier, obviously that 68 00:03:39,960 --> 00:03:42,400 Speaker 3: is a lot of where the pricing pressure has come from. 69 00:03:42,440 --> 00:03:46,760 Speaker 3: That sticky services inflation proving very very persistent. As we 70 00:03:46,800 --> 00:03:50,080 Speaker 3: talk about the degree to which inflation has come down, 71 00:03:50,160 --> 00:03:52,520 Speaker 3: granted everything you said about how far it still has 72 00:03:52,600 --> 00:03:56,720 Speaker 3: to go, can we really attribute central bank policy to 73 00:03:56,800 --> 00:03:58,960 Speaker 3: being the reason why or is it the easing of 74 00:03:59,000 --> 00:04:01,600 Speaker 3: some of the supplies side challenges we were facing that 75 00:04:01,640 --> 00:04:05,240 Speaker 3: as the primary driver. And if that's the case, when 76 00:04:05,320 --> 00:04:08,120 Speaker 3: central bank policy actually kicks in to do its job, 77 00:04:08,360 --> 00:04:09,600 Speaker 3: where does that leave us. 78 00:04:10,480 --> 00:04:13,160 Speaker 2: Well, So, I think there are different different channels through 79 00:04:13,160 --> 00:04:15,760 Speaker 2: which monetary policy is playing a role here. So first, 80 00:04:16,120 --> 00:04:19,359 Speaker 2: it's clearly the case that some of the moderation in 81 00:04:19,560 --> 00:04:23,320 Speaker 2: energy prices we've seen over the last six months or 82 00:04:23,360 --> 00:04:26,320 Speaker 2: so is also in part because the global economy is 83 00:04:26,360 --> 00:04:28,919 Speaker 2: slowing down, and that's also related to a tightening of 84 00:04:28,960 --> 00:04:32,320 Speaker 2: monetary policy. As everyone is sort of spending less. There's 85 00:04:32,360 --> 00:04:34,960 Speaker 2: less demand for goods just described. There is also less 86 00:04:35,000 --> 00:04:37,560 Speaker 2: demand for energy to produce the goods or ship them around, 87 00:04:37,560 --> 00:04:40,719 Speaker 2: et cetera. So we see some effect of monetary policy there. 88 00:04:40,880 --> 00:04:44,680 Speaker 2: A second, very important effect of monetary policy is that 89 00:04:44,760 --> 00:04:47,000 Speaker 2: we've been able central banks have been able to keep 90 00:04:47,320 --> 00:04:52,640 Speaker 2: inflation expectations very well anchored in the medium term. And 91 00:04:52,720 --> 00:04:54,680 Speaker 2: so here you have to ask yourself, what would have 92 00:04:54,680 --> 00:04:57,120 Speaker 2: happened if central banks have done nothing, then we had 93 00:04:57,160 --> 00:05:01,680 Speaker 2: this huge increase in inflation rates and seeing nothing being done, 94 00:05:01,880 --> 00:05:05,080 Speaker 2: households and firms that have started expecting that this inflation 95 00:05:05,200 --> 00:05:07,560 Speaker 2: could continue in the future, and that that's not happened. 96 00:05:07,880 --> 00:05:10,760 Speaker 2: Why would because central banks got in and tightened monetary policy, 97 00:05:11,000 --> 00:05:14,719 Speaker 2: and that has helped contain actual inflation. And the third 98 00:05:14,720 --> 00:05:17,280 Speaker 2: part is the one you mentioned on services and the 99 00:05:17,320 --> 00:05:20,480 Speaker 2: impact of monetary policy on the broader economy. We're starting 100 00:05:20,480 --> 00:05:24,440 Speaker 2: to see signs of monetary policy cooling off activity now. 101 00:05:24,600 --> 00:05:29,080 Speaker 2: We're seeing interest expenses increasing, we're seeing loan demand decreasing, 102 00:05:29,200 --> 00:05:32,600 Speaker 2: loan growth coming down quite sharply in the number of countries. 103 00:05:32,839 --> 00:05:36,400 Speaker 2: So we're seeing real estate markets also feeling some pressure. 104 00:05:36,600 --> 00:05:39,359 Speaker 2: So these are all the traditional channels through which monetary 105 00:05:39,400 --> 00:05:42,279 Speaker 2: policy is acting on the economy, and they are all 106 00:05:43,120 --> 00:05:44,240 Speaker 2: oil in play right now. 107 00:05:45,040 --> 00:05:47,919 Speaker 1: You're a great example of that, Pierre Olivier with the 108 00:05:47,920 --> 00:05:50,200 Speaker 1: biggest drop on load demand and record. We saw that 109 00:05:50,279 --> 00:05:55,080 Speaker 1: data today. Can we ever get back to two percent inflation? 110 00:05:55,440 --> 00:06:00,320 Speaker 1: Or is equilibrium changed? Has something fundamentally changed with this 111 00:06:00,360 --> 00:06:01,279 Speaker 1: global economy? 112 00:06:02,520 --> 00:06:04,920 Speaker 2: We don't think that something is fundamentally changed. I mean 113 00:06:04,920 --> 00:06:09,880 Speaker 2: we will have in projections, we will have inflation coming 114 00:06:09,920 --> 00:06:13,240 Speaker 2: back to several bank targets sometime towards the end of 115 00:06:13,240 --> 00:06:15,640 Speaker 2: twenty twenty four, in twenty twenty five. So it's a 116 00:06:15,680 --> 00:06:18,240 Speaker 2: little bit delayed compared to what we're expecting earlier. And 117 00:06:18,279 --> 00:06:21,160 Speaker 2: that's the persistence of inflation that we're talking about. But 118 00:06:21,200 --> 00:06:24,960 Speaker 2: we're still seeing it coming down eventually, you know, within 119 00:06:25,000 --> 00:06:28,160 Speaker 2: a year and a half or so to central bank targets. 120 00:06:28,640 --> 00:06:31,039 Speaker 2: Let's remember that central banks have the tools to bring 121 00:06:31,080 --> 00:06:34,240 Speaker 2: inflation back to their targets, and of course they want 122 00:06:34,279 --> 00:06:35,880 Speaker 2: to navigate this and do it in a way that 123 00:06:35,920 --> 00:06:38,040 Speaker 2: doesn't crash the economy. The objective is not to crush 124 00:06:38,080 --> 00:06:40,479 Speaker 2: the economies, just to keep price stability. 125 00:06:42,000 --> 00:06:42,160 Speaker 1: Right. 126 00:06:42,200 --> 00:06:44,120 Speaker 3: Well, while we're talking about trying to get to two 127 00:06:44,160 --> 00:06:47,400 Speaker 3: percent inflation here in the US and Europe elsewhere, we 128 00:06:47,480 --> 00:06:49,840 Speaker 3: have to talk about the inflation levels in one country 129 00:06:49,880 --> 00:06:53,599 Speaker 3: in particular, Pierre Lvier, Argentina, you are forecasting one hundred 130 00:06:53,680 --> 00:06:57,279 Speaker 3: and twenty percent inflation. Is there a real risk that 131 00:06:57,320 --> 00:07:00,279 Speaker 3: they reach hyper inflation levels that things continue you on 132 00:07:00,320 --> 00:07:01,040 Speaker 3: this trajectory. 133 00:07:02,360 --> 00:07:05,400 Speaker 2: Well, Argentina, we've had a significant upward revision of the 134 00:07:05,400 --> 00:07:08,040 Speaker 2: inflation rates, and of course it's a very challenging environment. 135 00:07:08,400 --> 00:07:11,240 Speaker 2: It's an environment that's challenging for a number of reasons. 136 00:07:11,320 --> 00:07:14,160 Speaker 2: One of which, you know, which of course is very 137 00:07:14,160 --> 00:07:16,440 Speaker 2: difficult to deal with right now, is they are facing 138 00:07:16,480 --> 00:07:21,640 Speaker 2: a very severe draft and so the agricultural production of 139 00:07:21,760 --> 00:07:25,640 Speaker 2: Argentina and Argentina is one of the major agricultural producers 140 00:07:25,640 --> 00:07:29,720 Speaker 2: in some of the crops has been severely lowered for 141 00:07:29,840 --> 00:07:32,560 Speaker 2: this year, and so that creates a very challenging environment. 142 00:07:33,680 --> 00:07:38,480 Speaker 2: Inflation numbers at that level is always a very very 143 00:07:38,800 --> 00:07:43,240 Speaker 2: warisome sign. And what we are doing is, you know, 144 00:07:43,920 --> 00:07:45,920 Speaker 2: working with the authorities and trying to make sure that 145 00:07:45,960 --> 00:07:49,360 Speaker 2: we have in place pulses that will prevent inflation from 146 00:07:49,640 --> 00:07:52,440 Speaker 2: escalating from this already very high level. 147 00:07:53,360 --> 00:07:55,520 Speaker 1: Well, there's also the question if it's forty four billion 148 00:07:55,600 --> 00:07:59,080 Speaker 1: dollar loan, which the IMF is currently talking to Argentina 149 00:07:59,080 --> 00:08:02,080 Speaker 1: about this a current review, if it is approved on 150 00:08:02,120 --> 00:08:06,720 Speaker 1: the staff level agreements, what sort of payout could we 151 00:08:06,840 --> 00:08:08,920 Speaker 1: see from the IMF to Argentina. 152 00:08:10,200 --> 00:08:12,520 Speaker 2: Well, these discussions are ongoing, and I think it's a 153 00:08:12,520 --> 00:08:14,960 Speaker 2: little premature to comment on them right now because they're 154 00:08:14,960 --> 00:08:18,160 Speaker 2: really happening as we speak. But let's just say that 155 00:08:18,200 --> 00:08:21,440 Speaker 2: we have the conversations between the authorities and the International 156 00:08:21,440 --> 00:08:25,480 Speaker 2: Monetary Fund. They are trying to find a package of 157 00:08:25,600 --> 00:08:28,120 Speaker 2: measures that will be helpful for Argentina, and we'll take 158 00:08:28,120 --> 00:08:31,760 Speaker 2: into account the specific circumstances that are affecting the country 159 00:08:32,200 --> 00:08:34,560 Speaker 2: and we'll try to put the country on the firmer 160 00:08:34,640 --> 00:08:36,760 Speaker 2: path to growth and monetary stability. 161 00:08:38,160 --> 00:08:41,199 Speaker 3: And just one final question on Argentina, would the IMF 162 00:08:41,240 --> 00:08:43,840 Speaker 3: allow that country to use IMF funds to intervene in 163 00:08:43,840 --> 00:08:44,720 Speaker 3: currency markets? 164 00:08:46,040 --> 00:08:47,880 Speaker 2: Well, again, this is part of the discussions that are 165 00:08:47,880 --> 00:08:50,880 Speaker 2: taking place. I mean, obviously, in a country like Argentina, 166 00:08:51,200 --> 00:08:54,080 Speaker 2: movements in the exchange rate feed very quickly into inflation, 167 00:08:54,160 --> 00:08:56,839 Speaker 2: so that's a source of concern. At the same time, 168 00:08:57,120 --> 00:08:59,920 Speaker 2: foreign exchange reserves are very limited and they have to 169 00:09:00,040 --> 00:09:03,160 Speaker 2: be deployed judiciously. And so that's kind of the tension, 170 00:09:03,360 --> 00:09:06,280 Speaker 2: is that the country is facing again. These are sort 171 00:09:06,320 --> 00:09:09,520 Speaker 2: of elements that are being consideration right now. 172 00:09:09,840 --> 00:09:11,800 Speaker 3: All right, well, we look forward to hearing more when 173 00:09:11,800 --> 00:09:14,400 Speaker 3: you've worked out some of those elements. Pierre Olivier gorshab 174 00:09:14,480 --> 00:09:16,680 Speaker 3: I am as chief Economist. Thank you very much for 175 00:09:16,800 --> 00:09:18,439 Speaker 3: joining us today. We appreciate your time.