IMF warns of 'dangerous' results as Trump criticises Fed

Washington

THE International Monetary Fund (IMF) warned of "dangerous" consequences for the US economy if moves such as President Donald Trump's calls for Federal Reserve interest-rate accommodation lead to monetary policy mistakes.

"Undermining central-bank independence would be dangerous," Tobias Adrian, director of the fund's monetary and capital-markets department, said when asked about Mr Trump's recent criticism of the Fed. He spoke as the IMF's spring meetings were getting under way in the US capital. The central bank in the US "is set up as a very independent institution. The governors and the chair are appointed for many years. It's very much rooted in the institution that they don't have to listen if they get calls" from politicians, Mr Adrian said on Wednesday in an interview in Washington.

Mr Trump has repeatedly criticised the Fed for not doing more to boost the US economy. Last week he called for lower rates and the restoration of the Fed's bond-buying programme, known as quantitative easing. In another effort to sway policy, the president has said he wants to nominate two political loyalists to its board of governors: former pizza executive Herman Cain and Stephen Moore, a fellow at the conservative Heritage Foundation.

The Fed left its policy rate unchanged last month, and chairman Jerome Powell, whom Mr Trump installed in February 2018, said rates could be on hold for some time as global risks weigh on the economic outlook and inflation remains muted. The IMF supports the Fed's stance on monetary policy, Mr Adrian said.

The IMF's latest Global Financial Stability Report warns that easy monetary policy and financial conditions may raise already high debt levels in advanced economies, raising "the spectre of a deeper downturn in the future".

The IMF sees elevated vulnerabilities in sovereign and corporate assets, as well as among non-bank financial institutions, in major economies around the world.

The credit tightening from last year's market selloff was too fleeting to have an impact on financial stability, making it likely that vulnerabilities will continue to build, the fund said. BLOOMBERG