IMF Calls For Clear Communication About Stimulus Exit To Avoid Volatility

(RTTNews) - The International Monetary Fund said central banks of advanced economies should provide a clear and effective communication about the exit from unconventional monetary policy in order to reduce the risk of excessive market volatility.

Surprises about the future course of monetary policy in major advanced economies have particularly strong effects on EM asset prices and capital flows," the IMF said.

It is therefore important for advanced economy central banks to provide clear communication and adequate market guidance, it said.

After the Fed's tapering announcement last year, funds moved out of emerging economies sharply. The emerging economies that acted early and decisively tended to fare better during market volatility, the lender noted.

Targeted foreign exchange intervention to reduce volatility where reserves were adequate was also effective.

Further, the IMF said weaknesses in macroeconomic fundamentals need to be addressed through coherent and credible macro policies and frameworks.