By Pete Schroeder
WASHINGTON (Reuters) – Policy makers around the world are entering a difficult phase of recovery after the pandemic and must be careful to provide continued economic support without promoting instability in financial markets, warned the International Monetary Fund (IMF) in this Tuesday.
After nearly 20 months of the global pandemic, many countries, including the United States, are now thinking about how to withdraw extraordinary economic stimulus packages, a process that carries with it risks of disrupting global markets.
In its latest Global Financial Stability Report, the IMF called on authorities to “act decisively” and target ongoing economic support programs tailored to each country’s needs.
Quick action and clear communication ahead of policy changes will be critical to ensuring that economic aid gets where it’s needed without spurring inflation or increasing volatility, the group warned.
“The authorities are faced with a challenging balance: maintaining short-term relief programs for the global economy, while preventing the consequences and risks of financial stability in the medium term,” says the report.
The document highlights some early “warning signs” of instability, pointing to increased financial risk-taking and weaknesses among non-bank financial institutions, such as life insurance funds.
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