IMF to monitor central bank stimulus spillovers

The International Monetary Fund will monitor potential negative effects spilling over from massive central bank stimulus in advanced economies, IMF chief Christine Lagarde said Saturday.

"Concerns are rising about the spillovers from loose and unconventional monetary policy" that includes bond-purchase programs and historically low interest rates, Lagarde said.

Lagarde, setting out a global agenda for the institution at the IMF-World Bank spring meetings in Washington, said particular attention would be paid to the impact of spillovers on emerging-market economies.

The IMF managing director, who on Tuesday had hailed central banks as the "heroes" of the financial crisis," warned that their unprecedented easy-money policies may cause "stability risks" by pushing capital flows into emerging-market countries, increasing the risk of upsetting foreign-exchange markets and boosting some commodity prices.

These effects "should be monitored," she said.

Lagarde pointed to heightened concerns about the impact of ultra-loose monetary policies that nevertheless have helped the global economy pull out of the 2008-2009 Great Recession.

"While monetary expansion is helping to bolster growth in major advanced economies, the boost from further action is diminishing as financial conditions have stabilized," she said.

"At the same time, many emerging-market economies are concerned about the possible blow to output and financial system if large inflows of capital reverse rapidly."

In a report published last week, the IMF warned against potentially disorderly exits from stimulus by major banks including the US Federal Reserve and the European Central Bank.

On Saturday, at an African finance ministers news conference, Nigeria's Ngozi Okonjo-Iweala, echoed the IMF's concern about stimulus exits.

"The pace at which this is done is important," she said.

"The signal -- which should be given ahead so we can prepare economies to what consequences might be -- is important, because we don't want to have precipitated a situation in which money suddenly flows out of the country."

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