Lagarde: Fed 'Signal Has to Be Very Clear'

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Aug. 23 (Bloomberg) -- IMF Managing Director Christine Lagarde discusses the Jackson Hole meeting of central bankers, Federal Reserve monetary policy and the role of the IMF in the global recovery with Sara Eisen on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Symposium is on site with imf managing director christine lagarde.

Thank you for joining us in jackson hole.

What strikes me is this layer of uncertainty with monetary policy as we enter a new phase of the global economy.

What is your biggest take away from the meeting?

I think it is a very good meeting.

A forum where central bankers can talk to each other and it goes straight to one of the points i made is that there has to be cord nation.

Helping the economy avoid the precipice, it is not something that can last forever.

It has to be gradually withdrawn over time, and it has to be cord dated.

Coordination stands out to me because the fed is making a move to taper and scale back when you are going the other way, to mention emerging markets.

We don't think that all central banks will phase out from a conventional monetary policy at the same time.

We believe that there is a lot more to be done and central bankers will probably have to continue unconventional bollettieri -- monetary policies.

Whether it is sustainable is another story.

Whether it is time or not to withdraw from unconventional monetary policy.

And not to mention the impact the u.s.'s move could have serious -- could have.

On may the 22nd when chairman bernanke announced it might be considered, by way of clarification of specification, markets immediately jumped on that news.

And there was consequence for emerging markets.

We have clarity, well channeled communications, proper measurements for the indices that will be used for the eventual tapering.

Has it not been clear enough?

I would not say that, but the signaling effect is almost more than the actual implementation.

It is an unknown quantity which needs to receive a very clear signal, when things will happen and on what basis.

How messy can it get for emerging markets?

She was talking about the prospect of currency crises, bank defaults, obviously not what is happening, but there is a probability.

I hope that we can learn from the 90's. and that it will take into account what we learn from those days.

Emerging markets are not one single region or group of countries.

We are seeing a great differentiation between those countries that have had strong fundamentals, good economic policies, reforms, it is much more evident.

It is a very strong signal that external factors matter and fundamentals of each and every economy is key as well to stability.

Usually when we get together, we talk about europe.

Are you willing to say that europe has turned the corner and the worst is behind them?

We are globally on the path to recovery.

Not yet strong enough, and with very strong support rum unconventional monetary policy.

Don't forget that the european central bank has been a strong support for european recovery.

The latest numbers we have received from germany are encouraging.

Whether it is manufacturing, service activity, that is heading in the right direction.

But it needs to be sustained over time.

Crossing fingers for the eurozone, but i would not necessarily draw the conclusion that they are out of the woods and nothing needs to be done.

There is more the ecb could do to support the recovery and the economy.

Is that something that you support?

We have consistently said that the european central bank still has room to maneuver.

But we have also consistently said that for it to be effective, the banking system needs to be unclogged.

Liquidity as well as instruments need to move fluidly within the system.

That is what i mean by more work to be done.

Will continue the jump around the globe because i want to ask you about egypt.

There have been negotiations for the loan.

The upheaval has delayed that.

Is there a chance that egypt could use more money at this point given everything that is going on?

We have been working with egypt since last august.

And actually before that.

We are still in touch on the technical level.

We are keen to support the egyptian people during this transition.

Not all the ingredients are on the table.

There needs to be mobile political endorsement, another stability for policy commitments to be delivered.

That is not the case, clearly.

We remain available, clearly enough for the country to come to the table, those ingredients that i just mentioned.

We are on a path to recovery, calling the coverage the road to recovery.

The imf played a critical role during the crisis.

How does the imf maintained a prominent role in the global economy now that we are on this path for recovery?

I think the imf will continue to be prominent if it really focuses on the member 's needs.

Here, members are first.

They were hit by the crisis.

I believe that they might want to use some of our precautionary instruments.

When i look at the balance sheet, some of the largest commitments are to countries such as mexico, poland.

Under precautionary lines that they have drawn but are available for security purposes.

This text has been automatically generated. It may not be 100% accurate.


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