The Straits Times
Published on Oct 15, 2012

Emerging economies lash out at US stimulus

Some countries back IMF chief's concern over overheating, imbalances


TOKYO - IMF managing director Christine Lagarde said the United States' third round of quantitative easing - the introduction of new money supply to boost economic growth - could hurt emerging economies.

"This could strain the capacity of these economies to absorb the potentially large flows and could lead to overheating, asset price bubbles and the build-up of financial imbalances," she said at the International Monetary Fund (IMF) meetings in Tokyo on Sunday.

Her view has found support from emerging economies. It was supposed to be curtains down yesterday, but that did not stop delegates from hitting out at controversial policies like the US' decision to loosen monetary policy.

In its defence, the US argued that a strong US economy would boost global growth. "It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies," US Federal Reserve chairman Ben Bernanke said in prepared remarks for a seminar in Tokyo on Sunday.