A banking crisis in the U.S. and Europe has worsened the outlook for the global economy and increased the risks of an even larger financial calamity, according to managing director of the International Monetary Fund Kristalina Georgieva, who urged vigilance as more instability might make the task of reducing inflation without triggering a recession much harder for central banks around the world.
The waters have not yet calmed after the collapses of Silicon Valley Bank and Signature in the U.S. and Credit Suisse in Europe, with shaky bank stocks including First Republic and Germany’s Deutsche Bank still making investors nervous. Banking woes are the latest sign that the global financial system’s transition from loose monetary policy and near-zero interest rates to a high-rate environment comes with an adjustment period, but in the near-to-medium term, those growing pains translate to higher risks of even bigger economic calamities.
