The International Monetary Fund said last Tuesday that markets have been exaggerated about US Federal Reserve's plans to stop purchasing bonds. It stated the absence of clarity regarding the proposal was part of the problem.
"The Fed has no clue what will happen when it starts selling assets," said Olivier Blanchard, IMF Chief Economist. "So it cannot make any commitments in term of quantities."
Blanchard talked in an assembly at the Institute of International Finance in Paris. He said the US central bank's proposal on setting off a cascade of vending in global markets would start this year.
"Conceptually it (Quantitative Easing exit) is not fundamentally very difficult, but there is a problem of communication on how you do it, which is going to create volatility. But the volatility we have seen in the past week is exaggerated," Blanchard said.
If the US economy improved as predicted, the central bank would also stop a program called QE. Ben Bernanke, Fed Chairman, said that these would all take place by mid-2014.
Prior to this month, IMF suggested that the Fed should just stick to its bond-buying project until the year ends.
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