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IMF warns on effects of easing

(Global Times)

14:20, October 15, 2012

Monetary easing in the developed world could cause overheating and asset bubbles in emerging economies, the International Monetary Fund's managing director said in Tokyo on Sunday.

"Accommodative monetary policies... could strain the capacity of those economies to absorb the potentially large flows and could lead to overheating asset price bubbles," Christine Lagarde told the close of the IMF and World Bank's annual meeting.

Critics in emerging nations have argued that easing measures, particularly in the US, have driven down the value of the dollar and sparked huge capital flows to spill across their borders, raising the risk of overheating and driving up national currencies.

On Friday Brazilian Finance Minister Guido Mantega warned that his country would take "whatever measures it deems necessary" to fight the problem.

"Emerging markets can't passively endure large and volatile capital flows and currency fluctuations caused by rich countries' policies," Mantega said in Tokyo.

"Advanced countries cannot count on exporting their way out of the crisis at the expense of emerging-market economies."

However US Federal Reserve chief Ben Bernanke on Sunday rejected claims that central bank easing in rich countries was to blame for the huge waves of capital flowing into emerging economies.

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