In her speech at Jackson Hole today, IMF Chief Christine Lagarde sounded the alarm on the recent turmoil in emerging markets. Their currency and bond markets have been roiled by QE tapering talk in the US as capital flows back to the developed world. Her basic message was that the Fed and other central banks should consider the impact on other countries when exiting their unconventional monetary policies. In the speech titled, “The Global Calculus of Unconventional Monetary Policies,” she said:
So this is my main message today: We need to work better together to understand more fully the impact of these unconventional policies--local and global--and how that affects the path of exit. And, above all, we must use the time wisely and not waste the space provided by unconventional policies. Global policymakers--all policymakers, within countries and across countries--have a responsibility to take the full range of actions needed to restore stability and growth, and to reduce imbalances.