The head of the International Monetary Fund cautioned the world’s major central banks Friday not to withdraw their unconventional support for weak economies too soon.
IMF Managing Director Christine Lagarde said stimulative policies are still needed in key regions, especially Europe and Japan, which have struggled with prolonged weakness. She made the comments as part of the Federal Reserve’s annual conference in Jackson Hole, Wyo.
Lagarde said central banks must carefully develop strategies for scaling back their efforts to keep borrowing rates low. Any pullback should be determined by the strength of individual economies, she said.
Her comments come as the Fed is signaling that it could slow its bond purchases later this year if the U.S. economy continues to improve. The Fed’s bond buying has helped keep U.S. interest rates near record lows.
The anticipation of a slowdown in Fed bond buying has unsettled U.S. stock and bond markets and sent interest rates up. Rising U.S. rates have, in turn, triggered turmoil in some emerging economies, such as Turkey, India and Indonesia. Officials in those countries have tried to halt declines in the value of their currencies as investors have shifted money into higher-yielding investments elsewhere.