There is a growing risk from 'exessive' financial market bets that could quickly disclose if investors get frightened by geopolitical tensions or a shift in
U.S. interest rate policy, the International Monetary Fund said on
Wednesday.
The world's primary watchdog for financial and economic stability, said in a report it still has expectations that economic growth will advance in the second half of 2014 after a rough start to the year.
But it also warned that financial market indicators suggested investor bets funded with borrowed money looked "excessive" and that markets could quickly deflate if there were surprises in U.S. monetary policy or the conflicts in Ukraine and the Middle East.
To quote the IMF, "New downside risks associated with geopolitical tensions and increasing risk taking are arising."
The body prepared its report for the Group of 20 meeting of finance ministers and central bankers in Australia this weekend, and just before the U.S. Federal Reserve's regular meeting on Wednesday.
As Reuters reports, the
U.S. central bank repeated concerns over slack in the labor
market and renewed its pledge to keep interest rates near zero
for a "considerable time".
Some Fed officials, however, have stated publicly that the central bank should be ready to move rates up sooner and faster than financial markets expect given the spate of mostly good news on the U.S. economy.
