16th January 2015
Tumbling oil prices may have provided cheer for consumers at the pump but it will not save a global economy ‘on its knees’.
Christine Lagarde (pictured), head of the International Monetary Fund (IMF), said the fall in oil prices – which has the price of a barrel of oil half since August – was a ‘welcome shot in the arm’ for the world’s struggling economies.
Consumers have welcomed the fall in prices, seeing it as an effective tax cut.
However, in a speech delivered to the Council on Foreign Relations she said ‘too many countries are still weighed down by the legacies of the financial crisis, including high debt and high unemployment’ and that the global economy remained ‘on its knees’.
‘The oil price and US growth are not a cure for deep-seated weaknesses elsewhere. Overall, we believe that global growth is still too low, too brittle, and too lopsided,’ she said.
Lagarde highlighted the US as a bright spot in global economies although said the UK’s economic performance was ‘promising’.
The eurozone is the main cause of concern and Mario Draghi, head of the European Central Bank, is expected to unveil a new package of stimulus measures on 22 January.
The US Federal Reserve on the other hand is expected to tighten its monetary policy, becoming the first major bank to do so. However, Lagarde warned that a gradual approach to tightening in the US could have ‘negative effects for emerging markets and global financial stability’.