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IMF cuts global growth outlook

IMF cuts global growth outlook

The IMF cut its global growth forecast on Tuesday for the second time since April ahead of its biannual meeting later this week.  They indicated in World Economic Outlook that the global growth is too weak to bring down unemployment and little momentum exists from central banks, and warned U.S. and European policy makers that failure to fix their economic ills would prolong the slump.

US growth is expected at around 2% for 2012 and 2013 with the euro zone expected to contract by 0.4% and 0.2% respectively; global output is expected to increase by just 3.3% – the lowest since 2009. One of the biggest downgrades was to the UK economy, which the IMF expects to shrink by 0.4% this year and also added that Britain should defer spending cuts planned for next year if growth turns out to be much weaker than forecast.

Leading emerging markets such as China, India, Russia, and Brazil will all see slower growth.  Growth in the volume of world trade is projected to slump to 3.2% this year from 5.8% last year and 12.6% in 2010. The IMF also raised the question of whether the global economy has simply hit turbulence or whether the slowdown “has a more lasting component.”

As forecasted UK industrial output is down by 0.5%. However U.K. manufacturing fell more than economists forecast in August to 1.2%. ECB Chief Mario Draghi is currently speaking on the current state of the Eurozone economy in front of the Committee on Economic and Monetary Affairs of the European Parliament today at Brussels. He announced that the ECB is ready for OMT (Outright monetary transactions) which allows an unlimited bond buying program.

On the FX markets, Sterling extended its losses against the USD slipping to a one month low of $1.6018 as increasing concerns over the eurozone debt crisis saw investors move to safe-haven currencies.  The GBP EUR is trading at a range of 1.2346-1.2403.

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