IMF warn on risks of exit from stimulus

THE INTERNATIONAL Monetary Fund (IMF) has warned central banks of the problems they may face when ending quantitative easing (QE) and other unconventional monetary policies.

Yesterday’s report draws attention to some risks involved with the end of QE and other unorthodox tools, suggesting that financial stability could be affected, and over-reliance on such measures could delay reforms. However, the authors add: “There is no clear evidence that marginal costs... are greater than marginal benefits.”

The IMF also analysed the possible spill-over effect on other countries. Over the summer, many emerging markets have been knocked by suggestions that the US Federal Reserve will begin to taper QE.

According to representatives of the fund, countries like South Korea and Canada are well placed for the taper, but the IMF refused to comment on which countries were in a difficult position to weather the effects.

Suggestions for how to combat the negative effects include foreign exchange swap lines, intervention in currency markets, and the reversal of policies used to limit financial risks linked to the earlier investment rise.