Policy makers should prepare for more market volatility amid further financial tightening and “choppy” waters while in the global economy stemming from trade tensions, said Christine Lagarde, managing director of your International Monetary Fund.
The fund’s advice to central bankers and finance chiefs should be to continue building monetary and fiscal buffers with the risks ahead, she said within an interview Sunday with Bloomberg Television’s Haslinda Amin, after the IMF and World Bank meetings in Bali, Indonesia.
“Now is not the time to say, OK, fine, let’s just relax and complete a part of fiscal tolerance here and a slowing of reforms,” Lagarde said. On the trade disputes, she said “our message was clear: de-escalate the tensions, and open and reform the dialogue.”
The Bali meetings have been dominated by talk in the twin risks of trade and monetary policy tightening, come together every week where stock markets from your US to Asia were roiled as investors sought cover. Officials including Bank of Japan Governor Haruhiko Kuroda urged the united states and China to re-start talks around trade, while policy makers from emerging markets highlighted threats from Federal Reserve-led monthly interest hikes.
As for officials’ ability to deal with the next economic crisis, Lagarde said you can find “still, now, limited policy space” but the banking strategy is “much stronger” with better supervision and regulations, less non-performing loans and “still sensible” leverage.
Flexible forex rates are playing a “very good role to be a shock absorber,” she said.
“There are risks available inside the system, however, and that we must be aware about that, and we all need to make sure the buffers are rebuilt,” Lagarde said. “It’s time for them to buckle up.”
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