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Lagarde Warns World to Brace for Volatility If Fed Surprises

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Emerging markets need to prepare for capital flight if investors are surprised by the timing or pace of policy changes in developed economies, the IMF’s Managing Director Christine Lagarde said a day before the U.S. is expected to signal a shift in stance.

“We are perhaps approaching the point where, for the first time since 2006, the United States will raise short term interest rates later this year,” Lagarde said in Mumbai on Tuesday. “Even if this process is well managed, the likely volatility in financial markets could give rise to potential stability risks.”