London, Jan. 16: International Monetary Fund chief has warned about the risks to global economic recovery of deflation.
Christine Lagarde said ‘optimism is in the air’ about growth, but the recovery is still ‘fragile’.
According to the BBC, giving a speech in Washington, Lagarde said that a rising risks of deflation could be seen, which could prove disastrous for the recovery.
Deflation can reduce personal consumption as people wait for prices to fall further, and discourage investment because it can raise the real cost of borrowing, the report said.
Lagarde also warned about the volatility that could accompany the US Federal Reserve’s gradual withdrawal of monetary stimulus. (ANI)