Lagarde on Friday asserted that the stimulus helped support economic stability at both domestic and global level. Early in the crisis, the UMP helped prevent a collapse of the financial system and a collapse of activity, she said.
"Let me say it up front, I do not suggest a rush to exit. UMP is still needed in all places it is being used, albeit longer for some than for others," she said.
Arguing that in Europe more mileage to be gained from UMP and in Japan too, exit is very likely some way off, she said that the path to exit will and should depend on the pace of recovery, the latter mitigating the potential downsides of the former.
"This calculus will not be easy, however. Together, we need to keep an eye on both financial stability and growth. Together, we need to watch whether the benefits of UMP are subject to diminishing returns. Together, we need to analyze whether the financial side-effects get worse over time," she said.
"Just as with entry, exit will take into uncharted territory. Yet I remain optimistic. Central banks handled entry well, and we see no reason why they should not handle exit equally well," she said.
"So, the Fund and policymakers need to start thinking about what exit will eventually look like. That includes the implications for global economic and financial stability: the whole system, not just one part of it. This is an issue that the Fund has been watching and will continue to watch closely. It is, after all, the IMF's raison d'être," she said.


Latest News  from Business News Desk