International Monetary Fund cuts global growth estimates

Just what we need: More worries about global growth.

Last night the International Monetary Fund (IMF) cut its forecast for global economic growth to 3.7% in 2018 and 2019. In its last forecast three months ago the IMF had projected that the global economy would grow at a 3.9% rate. The reduction in projections was the first since July 2016.

The IMF also cut its forecast for the U.S. economy to 2.9% growth in 2018 and just 2.5% in 2019. In April the IMF had projected that the U.S. economy would grow at a 2.7% rate in 2019.

In explaining its projections the International Monetary Fund suggested that “growth fatigue” is setting in, especially in developing economies, and that trade tensions would take a bite out of global growth. (I think that what the IMF calls growth fatigue is the inevitable excesses in things like interest rates and economic stimulus that develop during a long period of growth and that need a periodic reset. The prime example of that at the moment is the need for global central banks to restore their balance sheets and to return monetary policy to “neutral” (whatever that means) after flooding global markets with liquidity to head off the worst effects if the global financial crisis.)

The projected growth rate for the global economy in 2018 would still be the strongest since 2011.

The yield on the 10-year U.S. Treasury peaked at a tick above 3.25% today. That was a seven-year high for Treasuries. The yield had dropped back to 3.21%, down 2 basis points from yesterday’s close, as of 3 p.m. New York time.

The Dollar Spot Index (DXY) was lower by 0.11%.

The Standard & Poor’s 500 was flat and the Dow Jones Industrial Average was lower by a scant 0.04%. The NASDAQ Composite gained 0.18%.

The CBOE S&P 500 Volatility Index (VIX) was higher by 1.56% to 15.93.