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Imf Chief Fears Risk Of Currency War After Japan's Zero Interest Rate Move

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The Bank of Japan’s surprise move to reinstate zero interest rates has led to a warning of the danger of a currency war from the head of the International Monetary Fund.

Dominique Strauss-Kahn warned that moves by central banks across the world to cut interest rates and carry out billions of pounds worth of quantitative easing could upset the global economy recovery as currencies chased each other ever lower.

In an interview with the Financial Times, he said: “There is clearly the idea beginning to circulate that currencies can be used as a policy weapon. Translated into action, such an idea would represent a very serious risk to the global recovery ... Any such approach would have a negative and very damaging longer-run impact.”

Japan surprised markets by adopting a zero interest rate policy and announcing plans for quantitative easing (QE) in an attempt to inject fresh stimulus into the economy.

The move led to an immediate fall in the value of the yen against the dollar.

The Japanese central bank has pledged to buy assets worth five trillion yen (£38bn) and cut its overnight rate to between zero and 0.1pc,from 0.1pc, reinstating the so-called “zero interest policy” that the Bank only ended in July 2006.

It will keep its benchmark rate effectively at zero until establishing price stability, adopting a similar loose policy commitment to the US Federal Reserve.

The size of the QE programme roughly matches the extra stimulus package desired by the Japanese government. Japan is running out of options as it seeks to reinvigorate its economy in the face of national debt running at twice the national output – the largest of the advanced economies.

It is also trying to counter the yen’s strength, which has been one cause of the country dipping in and out of deflation over the past 15 years. Lingering concerns about the global economy pushed the gold price up 1.8pc to another record high, of $1,340.20 an ounce.

Later Strauss-Kahn admitted that the Pope was Catholic and bears use the woods for a toilet.

Shocking the IMF is fearing a currency war, totally unexpected. I mean who could have foreseen this outcome?

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  • 419 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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