The Federal Reserve's decisive action at the outset of the novel coronavirus outbreak enabled the smooth functioning of markets in the United States, the International Monetary Fund (IMF) said in a document of its assessment of the US response to the pandemic
WASHINGTON (Pakistan Point News / Sputnik - 11th August, 2020) The Federal Reserve's decisive action at the outset of the novel coronavirus outbreak enabled the smooth functioning of markets in the United States, the International Monetary Fund (IMF) said in a document of its assessment of the US response to the pandemic.
"[The IMF] Directors appreciated the Federal Reserve's decisive response in the early stage of the crisis, which had helped maintain the smooth functioning of financial markets, ease financial conditions, and relieve strains in global dollar funding markets," the document, dubbed "2020 Article IV Consultation with United States," said on Monday.
However, the IMF directors said they saw a need for more action, given that inflation and employment are likely to remain below targets for an extended period of time, while closely monitoring potential risks to financial stability.
Possible Federal Reserve action could be conducted through expanded asset purchases and more explicit forward guidance, they said.
The IMF's directors observed that the US financial system has been resilient in the face of the recent economic and financial shock, but called for continued vigilance given the rising corporate leverage, a continued migration of activity to nonbank financial institutions and complex interlinkages among institutions and markets.
"[The] Directors emphasized the need to preserve bank capital buffers and stringency of prudential requirements, enhance macroprudential tools, intensify crisis preparedness, and address data gaps," the document said. "They also recommended that the authorities consider strengthening institutional arrangements for systemic risk oversight and introducing a more explicit financial stability mandate for principal regulators."
The IMF directors also said the US authorities needed to reverse trade restrictions and work constructively with partner countries to resolve trade tensions and modernize multilateral trading systems, noting that Washington's plans for currency-based countervailing duties would increase policy uncertainty, have negative spillovers and undermine the multilateral trading and international monetary systems.