IMF Says Emerging-Market Turmoil Shows Need for More Safeguards

Emerging-market turmoil highlights a need for some countries to do more to insulate their economies from external shocks, said Jose Vinals, financial counselor and director of the monetary and capital markets department at the International Monetary Fund.

“Market jitters in recent days have reminded us that emerging economies have yet to complete their adjustment to more volatile external conditions and higher risk premiums,” Vinals said in a statement today. “Emerging-market economies remain vulnerable to future increases in U.S. interest rates, although investors are increasingly differentiating among countries based on their financial vulnerabilities and macroeconomic imbalances.”

Speaking to reporters in Washington, he said that the latest bout of instability stems from “problems in a subset of emerging-market countries, but going forward the expectation would be as it happened in the past that those countries with the stronger fundamentals would be able to withstand much better these headwinds.”

He said that so far, “this is not a panic situation” and is different from events last May, when the Federal Reserve unsettled markets with talk of scaling back bond purchases.

He told reporters that the Fed has been successful convincing markets that a tapering of its quantitative easing program isn’t the same as tightening monetary policy.

“In terms of timing, I think that the Fed has been prudent and it has adequately modulated its pace of normalization and the expectations of tapering and tightening in a way that is consistent with the data that had been forthcoming,” he said. “If they had started to taper beforehand I think it would have been premature.”

To contact the reporter on this story: Katherine Peralta in Washington at kperalta2@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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