IMF chief economist Olivier Blanchard to retire

Olivier Blanchard, the influential chief economist of the International Monetary Fund, has announced plans to retire this year, leaving a large hole in the world's leading financial institution.

The Frenchman steered the IMF's research through the global financial crisis and into the recovery, and gained a reputation for challenging the fund's longstanding internal views as events appeared to disprove many traditional economic orthodoxies.

Christine Lagarde, IMF managing director, said a successor to Mr Blanchard would be sought immediately to ensure a smooth transition. The 66-year-old will leave the fund at the end of September.

Mr Blanchard joined the IMF in September 2008, pledging to improve the quality of its research. "The credibility of the IMF depends on the quality of the economic advice it delivers," he said at the time.

The difficulty of such forecasts can be seen in comments he made on only his second day in the job, when he predicted that the global economy "can weather the financial crisis at limited cost to economic activity".

IMF colleagues said he would be remembered more for his willingness to challenge long-held IMF beliefs than his mixed forecasting record.

Mr Blanchard actively supported the successful campaign by Dominique Strauss-Kahn, former IMF managing director, for a mass fiscal stimulus as a response to the deepening financial crisis in 2008-09.

In 2010 he suggested a radical move to raise inflation targets from the usual levels of about 2 per cent to something closer to 4 per cent to give central banks more room for manoeuvre in cutting rates in response to a downturn.

Come 2012 he swatted aside another orthodoxy, using the IMF's autumn World Economic Outlook to publish research suggesting austerity was much more damaging to recovery than the fund had previously thought.

More recently, he highlighted the slowdown in medium-term economic prospects, helped rethink the fund's opposition to capital controls and suggested labour market liberalisation was insufficient reform to bolster growth.

On Thursday Ms Lagarde was effusive in her praise. "I have immensely valued Olivier's intellectual leadership, wise counsel, friendship and loyalty during the past four years. Like everyone else at the fund, I will miss him," she said.

Not all of Mr Blanchard's interventions as IMF chief economist have proved influential or successful, however.

His call for higher inflation targets was condemned and ignored by central bankers, while the IMF stepped back from its analysis of the effects of austerity, noting in 2013 that its results applied only for one year. His gloomy outlook for the global economy in October also annoyed finance ministers.

His biggest spat as chief economist was with the UK government, which he repeatedly singled out for practising excessive austerity. But he found himself on the wrong side of the fiscal debate as his warning in April 2013 that the UK's deficit reduction strategy was "playing with fire" coincided with a recovery of the British economy.

Aides to George Osborne recount how Ms Lagarde was forced to apologise for the fund's advice and Mr Blanchard later congratulated the UK chancellor on the recovery through gritted teeth.

Mr Blanchard will initially take up a senior fellowship at the Peterson Institute for International Economics in Washington.

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