IMF urges Fed, central banks to monitor stimulus

WASHINGTON — The International Monetary Fund is urging the Federal Reserve and other central banks to closely monitor their extraordinary efforts to jump-start economic growth, warning that the policies could inflate asset bubbles and destabilize financial markets.

The global lending organization said in a global stability report released Wednesday that the low interest rate policies, which are intended to spur borrowing, spending, and investing, are providing ‘‘essential support’’ for economic growth and should continue. But it noted that the policies could have ‘‘adverse side effects,’’ including excessive corporate debt, a stock market bubble, and risky investments by pension funds.

The fund says there are few signs of asset price bubbles yet.


The global stability report was released in advance of spring meetings of the IMF and World Bank in Washington this week.

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The Fed has said it plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. And it is purchasing $85 billion a month in Treasury and mortgage bonds to lower long-term rates and encouraging more borrowing.

The effect on interest rates has also encouraged investors to shift money into stocks and other riskier holdings, and away from bonds. By driving up stock prices, the Fed hopes the lower rates will create a ‘‘wealth effect’’ and encourage more consumer spending and economic growth.

At a meeting of the Fed’s policy-making committee last month, some officials argued that the Fed’s programs could lead to another stock market bubble or encourage investors to take on too much debt.

Janet Yellen, the Fed’s vice chair, downplayed those risks Tuesday at a conference sponsored by the IMF.


‘‘I don’t see pervasive evidence of rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would threaten financial stability,’’ she said.

The Fed is working with other regulators to enhance its oversight of financial markets, she said.

Associated Press