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Repeats Story Initially Transmitted at 01:00 GMT Oct 9/21:00 EST Oct 8
--IMF Sites Trade Policies As Key Negative Factors To The Outlook
By Kevin Kastner
     WASHINGTON (MNI) - The International Monetary Fund issued the October
update to their World Economic Outlook in Bali Tuesday morning. The update was
decidedly more negative than in the previous two reports.
     Here are the key points from October WEO update:
     -The IMF lowered the global growth pace to 3.7% for both 2018 and 2019 from
the 3.9% rates reported in the April and July WEO releases, noting that "the
balance of risks to the short-term global growth forecasts has now shifted to
the downside" and that the chance of an upside surprise has diminished.
     --The IMF noted that rising trade tensions, a move away from rules-bases
trading systems, and the expected contractionary impact of an unwinding of US
fiscal policy in 2020 are key negative factors in the outlook. The IMF noted
that downward adjustments to growth were larger for countries that trade with
the US.
     --Global inflation has been lifted by energy prices, but core measures of
inflation have remained below target in a number of countries. At the same time,
global wage growth has remained modest. However, inflation surprises could lead
to faster policy tightening, particularly in the US, creating tighter financial
conditions than already exist.  
     --The WEO update left the forecast for US growth at 2.9% for 2018, but
lowered their forecast for growth in 2019 to 2.5% from the 2.7% rate reported in
the April and July updates. The IMF suggested noted that the stimulative fiscal
policy measures that have boosted US growth and trimmed unemployment in 2018
will have a neutral impact in 2019 before being a drag on growth in 2020 and
beyond. The IMF suggests raising the revenue-to-GDP ratio through indirect
taxes.
     --The WEO suggests that the Federal Reserve should continue to gradually
tighten rates as US growth remains solid and the unemployment rate is at
decades-low levels, while acknowledging that the fiscal stimulus in an
already-strong US economy places increased burdens on the Fed to keep the
economy from overheating. The IMF forecasts an additional rate hike in 2018 and
four rate hikes in 2019, with the Fed Funds rate reaching 3.5% at the end of
2019.
--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com