Emerging ecos must have sound policies to deal with taper: IMF

SYDNEY: International Monetary Fund (IMF) chief Christine Lagarde today said emerging market economies, like India, should put in place sound fiscal and monetary policies to deal with impact of US tapering, while cautioning advanced economies against fast withdrawal of stimulus.

"... emerging market economies, you need to look after your various equilibriums. You need to look at your fiscal policy, you need to look at your monetary policy, you need to have the house in order to resist the volatility that can be induced from the tapering of the US Fed, in particular, at the moment," Lagarde said.

In a public question and answer session recorded for ABC television here, the IMF chief asked the US Federal Reserve to be "mindful" of the impact its stimulus withdrawal would have on developing nations.

"Don't go too fast and explain what you are doing," Lagarde said referring to stimulus exit policies adopted by developed nations.

The US Federal Reserve last month decided to cut its bond purchases by another USD 10 billion. It has now decided to purchase USD 65 billion per month of mortgage-backed securities and longer-term treasury securities as against USD 75 billion per month earlier.

The Fed had first in May 2013 announced it will taper monthly bond purchases, sending the markets world over into a turmoil with the rupee hitting record lows. However, later it postponed the decision.

The IMF chief said a "just a hint of tapering" in May last year had sent ripples through the financial markets.

India's central bank Governor Raghuram Rajan had in January 2014 said the US should also think about the impact of its monetary policy on other economies.

"I have been saying that the US should worry about the effects of its policies on the rest of the world," Rajan had said.