The global risk of recession is receding as inflation has eased toward central bank targets, IMF Director of Monetary and Capital Markets Department Tobias Adrian said Tuesday (October 22) in Washington, DC.

“Now with inflation heading towards target in, in many countries, the focus of the central banks has shifted from being primarily focused on inflation and towards also considering real activity. And so concerning real activity, we have seen upward surprises relative to expectations. In financial markets that has been particularly visible in earnings surprises that have been on the positive side. And so as a result, the likelihood of a global recession has continued to recede,” said Adrian at the launch of the Global Financial Stability Report at the IMF Annual Meetings.

While the balance of risks is largely supportive of a ‘soft landing’ scenario, there is worry that unforeseen shocks could upend growth and stability, the head of the IMF’s Monetary and Capital Markets Department said.

“So, there’s a kind of wedge in between the financial market implied volatility and the assessment of political or economic uncertainty. And so, this tension, worries us, as it gives rise to the potential for a sharp, readjustment of financial conditions.”

When asked about how the outcome of elections and changes in leadership this year in several major economies could impact stability or a slowdown in investments.

“I think to your broader point, you know, we don’t could comment on election outcomes, but we do know that financial markets tend to, see, you know, more uncertainty around those outcomes. And this may, affect financing conditions, around the world, including in Africa, uncertainty. And bring, you know, some slowdown in investments, in the near-term or the medium-term. And so those are all possible outcomes. I think, the key thing is, for, you know, the macroeconomic framework to remain stable, to address domestic situations and for countries that, may be facing, debt issues, to engage with their creditors early, including through the Common Framework and other international setups,” said Adrian.

Adrian was also asked about recent moves in China to shore up domestic demand, the property market and spur investment. 

“So, when we look at financial conditions, so, you know, the cost of funding, for the, for households and corporations in China, you know, those financial conditions have eased, quite remarkably. Equity markets have rallied. Long term bond yields have, have declined. And, we generally welcome that easing. We think that is the appropriate policy, for monetary policy,” said Adrian 

A full copy of the report can be found at: Global Financial Stability Report October 2024