WASHINGTON: The International Monetary Fund on Friday urged the Federal Reserve to prepare carefully its exit from its QE stimulus program, warning of the challenges in unwinding its easy-money policy.
The Fed should keep in place its quantitative easing bond-buying program through the end of this year, the IMF said.
However, it warned, "a long period of exceptionally low interest rates may entail potential unintended consequences for domestic financial stability and has complicated the macro-policy environment in some emerging markets."
"Unwinding monetary policy accommodation is likely to present challenges," it said. "While the macroeconomic benefits of asset purchases continue to outweigh the costs, the Fed should continue its preparations for a smooth exit."
Most important will be "effective communication" of its exit strategy as well as acute calibration of the timing of gearing down the Fed's $85 billion in monthly bond purchases, which aim at holding down longer term interest rates.
That will be critical "for reducing the risk of abrupt and sustained moves in long-term interest rates and excessive interest rate volatility as the exit nears, which could have adverse global implications," the IMF said.
indiatimes.com
The Fed should keep in place its quantitative easing bond-buying program through the end of this year, the IMF said.
However, it warned, "a long period of exceptionally low interest rates may entail potential unintended consequences for domestic financial stability and has complicated the macro-policy environment in some emerging markets."
"Unwinding monetary policy accommodation is likely to present challenges," it said. "While the macroeconomic benefits of asset purchases continue to outweigh the costs, the Fed should continue its preparations for a smooth exit."
Most important will be "effective communication" of its exit strategy as well as acute calibration of the timing of gearing down the Fed's $85 billion in monthly bond purchases, which aim at holding down longer term interest rates.
That will be critical "for reducing the risk of abrupt and sustained moves in long-term interest rates and excessive interest rate volatility as the exit nears, which could have adverse global implications," the IMF said.
indiatimes.com
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