The US Federal Reserve can reduce the risk of financial instability from expected interest rate hikes in the coming months by clearly communicating its monetary policy plans, the International Monetary Fund's key policy committee said, according to dpa. The US central bank has already signaled that it might start tightening monetary policy as early as June, after keeping its benchmark interest rate at an unprecedented near-zero since December 2008. The committee, which steers the Washington-based IMF's policies, said in a statement Saturday that "careful calibration and effective communication of policy normalization is needed" to ease potential shocks to the financial system, currency fluctuations and large swings in investment flows to fast-growing developing economies. The IMF members noted the challenge of "asynchronous monetary policies" - with the European Central Bank having recently reached near-zero interest rates and major quantitative easing, just as the Fed in Washington exits its long-running extraordinary measures. When the Fed's then-chairman Ben Bernanke suggested in June 2013 that the central bank was looking at future "tapering" of its bond-buying programme - a so-called quantitative easing that was ended last year - the speculation sparked a steep Wall Street selloff and a huge, rapid withdrawal of investment from emerging and developing economies. Particularly in Europe, transmission of highly accommodative monetary policy to the real economy requires continuing focus on shoring up banks and reducing private-sector debt, the IMF members said. The group vowed to "take further measures to lift actual and potential growth, and support our goal of a more robust, balanced and job-rich global economy." They called for productive infrastructure investment to meet "the urgent need to promote growth while ... accelerating the design and implementation of structural reforms." The statement listed "priorities" for structural reforms including liberalizing product and labour markets and combating corruption, and cited trade reforms that could "reinforce other reforms."
