The Federal Reserve cannot afford to ignore the risk of fallout in emerging markets from the winding down of its $85 billion-a-month bond buying program, said Christine Lagarde, managing director of the International Monetary Fund.
“Very negative spill-over effects on the emerging market economies could very much backfire on other economies. So to assume that [the] domestic economy is totally isolated, that a country is an island, would not be the right approach,” Lagarde told CNBC on the sidelines of the Ambrosetti Forum in northern Italy over the weekend.
“Without necessarily changing the mandate, without reviewing the terms of references, and maybe without even acknowledging it, I cannot believe that central bankers do not take into account what’s happening elsewhere in the world,” she said.
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