INDIA-LAGARDE Emerging markets must prepare for U.S. rate hike, says IMF's Lagarde in India
Record ID:
1377097
INDIA-LAGARDE Emerging markets must prepare for U.S. rate hike, says IMF's Lagarde in India
- Title: INDIA-LAGARDE Emerging markets must prepare for U.S. rate hike, says IMF's Lagarde in India
- Date: 17th March 2015
- Summary: MUMBAI, MAHARASHTRA, INDIA (MARCH 17, 2015) (ORIGINALLY 4:3) (ANI-NO ACCESS BBC) ****WARNING CONTAINS FLASH PHOTOGRAPHY*** MANAGING DIRECTOR OF INTERNATIONAL MONETARY FUND, CHRISTINE LAGARDE, AND GOVERNOR OF RESERVE BANK OF INDIA RAGHURAM RAJAN ARRIVING AT DAIS ANNOUNCER WELCOMING LAGARDE CHRISTINE LAGARDE AND RAGHURAM RAJAN SITTING DOWN (SOUNDBITE) (English) MANAGING DIRECTOR OF INTERNATIONAL MONETARY FUND, CHRISTINE LAGARDE, SAYING: "As economic conditions improve in at least some advanced economies, portfolio re-balancing out of the emerging market economies can be expected and some volatility cannot be ruled out. So, emerging markets need to prepare for that volatility, risk and this uncertainty." WHITE FLASH (SOUNDBITE) (English) MANAGING DIRECTOR OF INTERNATIONAL MONETARY FUND, CHRISTINE LAGARDE, SAYING: "The danger is that vulnerabilities that build up during a period of very accommodative monetary policy just as quickly as it built up can unwind suddenly when such policy is reversed, creating as a result significant market volatility." WHITE FLASH (SOUNDBITE) (English) MANAGING DIRECTOR OF INTERNATIONAL MONETARY FUND, CHRISTINE LAGARDE, SAYING: "In particular, those countries with higher GDP growth, stronger external current account positions, lower inflation and more liquid financial markets, all of that helped dampen market volatility. In addition, more resilient financial sectors contain the effect of such volatility. The reforms that have been initiated here in India are going in the right direction, are very timely, but will also need to be pursed with utmost speed." RAGHURAM RAJAN SITTING DOWN RAJAN TALKING TO LAGARDE, BOTH SHAKING HANDS
- Embargoed: 2nd April 2015 09:04
- Keywords:
- Location: India
- Country: India
- Topics: General
- Reuters ID: LVA4KGT4ZOKBTXBKR48E9N9GA95N
- Aspect Ratio: 16:9
- Story Text: Emerging markets must prepare for the impact of a rise in U.S. interest rates which could surprise in both its timing and pace, head of the International Monetary Fund (IMF), Christine Lagarde, said in India on Tuesday (March 17).
In a speech in financial capital Mumbai, Lagarde warned that there could be a repeat of the so-called "taper tantrum" seen in 2013 when then Federal Reserve Chairman Ben Bernanke's mere mention of trimming the Fed's bond purchase programme was met with a global market selloff.
"As economic conditions improve in at least some advanced economies, portfolio rebalancing out of the emerging market economies can be expected and some volatility cannot be ruled out. So, emerging markets need to prepare for that volatility, risk and this uncertainty," said Lagarde in a speech at India's central bank, Reserve Bank of India (RBI).
At that time in 2013, then-Fed Chair Ben Bernanke sent investors running when he talked about conditions that might cause the Fed to reduce its $85 billion-a-month in bond purchases aimed at stimulating the economy.
"The danger is that vulnerabilities that build up during a period of very accommodative monetary policy just as quickly as it built up can unwind suddenly when such policy is reversed, creating as a result significant market volatility," Lagarde said.
Lagarde said advanced economies could help reduce the risk of market volatility by communicating policy intentions clearly. But she added that emerging markets that had tackled economic vulnerabilities had fared better when shockwaves hit in 2013.
India, Lagarde said, is pursuing reforms that are timely, but she added that such reforms need speedy pursue.
"In particular, those countries with higher GDP growth, stronger external current account positions, lower inflation and more liquid financial markets, all of that helped dampen market volatility. In addition, more resilient financial sectors contain the effect of such volatility. The reforms that have been initiated here in India are going in the right direction and very timely but will also need to be pursed with utmost speed," said Lagarde.
She added that central banks should also stand ready to act, with both liquidity support and targeted foreign exchange interventions.
India has cut rates twice in out-of-cycle moves this year. In a statement published alongside its last cut, the RBI said the possible spillover of volatility from international financial markets was "a significant risk." - Copyright Holder: ANI (India)
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