IMF chief Christine Lagarde predicts 'disappointing' 2016 after US interest rate hike and China slowdown

The head of the International Monetary Fund has said rising US interest rates and a slowdown in the Chinese economy would lead to a "disappointing" 2016. Christine Lagarde said changes in the US and a switch to consumer-led growth in China needed to be handled "smoothly" and could create "uncertainty" in global markets.

Writing for German newspaper Handelsblatt, she said shrinking global trade and falling raw material prices would also contribute to uncertain economic conditions next year. She also pointed to weaknesses in the finance sector and emerging markets.

"In many countries the financial sector still has weaknesses and in emerging markets the financial risks are increasing. All of that means global growth will be disappointing and uneven in 2016," Lagarde wrote.

The IMF predicted global growth would stand at 3.6% in 2016 in a forecast made back in October. But after Federal Reserve chairwoman Janet Yellen tightened fiscal policy across the pond and increased US interest rates to 0.25% – the first increase in a decade – Lagarde warned of "potential spillover effects" in the case the dollar strengthens and companies default on payments.

The FTSE 100 was down almost half a percentage point at 6,284.21 in afternoon trading, while the Dax and Cac were down by more than 1% and 0.3% respectively.