The International Monetary Fund (IMF) said the short-term financial stability risks have increased somewhat against the backdrop of slightly tighter financial conditions. In the Global Financial Stability Report, the lender said the medium-term risks are still elevated as financial vulnerabilities, which have built up during the years of accommodative policies, could mean a bumpy road ahead and put growth at risk.
Although emerging markets have generally improved fundamentals, they could be vulnerable to sudden tightening of global financial conditions. The IMF cautioned that policymakers and investors should remain attuned to the risks of rising interest rates and higher market volatility. The IMF advised central banks to continue to normalize policy gradually and communicate clearly, and policymakers should address vulnerabilities by deploying and developing macroprudential tools.