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IMF warns on QE dependency

by: IFAonline
  • 12/04/2013
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IMF warns on QE dependency
Loose central bank policies could threaten global financial stability when interest rates rise as lenders become "addicted" to central bank financing, the International Monetary Fund (IMF) has warned.

The Telegraph reports it said lenders were putting off vital reforms due to dependency on policies such as quantitative easing (QE) and low interest rates.

 It said these policies had stabilised the economy but warned the longer they were used the greater the risk that negative effects could spill over into other parts of the economy, the report said.

“Financial stability risks may be shifting to other parts of the financial system, such as shadow banks, pension funds, and insurance companies,” the IMF said in a chapter of its Global Financial Stability Report.

“Despite their positive short-term effects for banks, these central bank policies are associated with financial risks that are likely to increase the longer the policies are maintained.”

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