Lagarde Calls for More Global Coordination as QE Exits Loom

http://www.bloomberg.com/news/2013-08-23/lagarde-calls-for-more-global-coordination-as-qe-exit-plans-loom.html

International Monetary Fund Managing Director Christine Lagarde urged policy makers to work more closely together as they plan eventual exits from unconventional monetary policies, endorsing swap arrangements between central banks as an instrument to weather instability.

While there’s no agreement about the impact of measures taken by central banks such as the Federal Reserve or the Bank of Japan, officials need to better understand the potential spillovers, Lagarde said in prepared remarks for an annual Fed conference in Jackson Hole, Wyoming. If the scaling back of stimulus creates renewed financial turmoil, some countries may not be able to withstand it on their own, she said.

“We need further lines of defense -- lines of defense that reflect our interdependence, our common purpose, and our mutual responsibility for the global economy,” Lagarde said at the event sponsored by the Kansas City Fed. “Swap lines -- along the lines provided by major central banks early in the crisis -- can help,” and the IMF stands “ready to provide policy advice and financial support,” she said.

The effects of the Fed’s potential tapering of its $85 billion in monthly bond purchases are showing in global markets. Emerging economies have seen an exodus of cash, with their 20 most-traded currencies falling about 4.4 percent in the past three months, according to data compiled by Bloomberg.