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IMF chief calls for CB cooperation

Washington – The head of the International Monetary Fund on Monday called for greater collaboration among the world’s central banks, citing the threat of turmoil spreading through the global financial system.

Global stakeholders must take “collective responsibility for managing the complex channels of the hyperconnected world,” IMF managing director Christine Lagarde said in a speech prepared for the Richard Dimbleby Lecture in London.

That translates into “all monetary institutions cooperating closely–mindful of the potential impacts of their policies on others,” she said.

Her comments, during one of the worst emerging-market selloffs in more than a decade, come after Friday’s criticism from Reserve Bank of India Governor Raghuram Rajan aimed at the US Federal Reserve. Mr. Rajan said international monetary cooperation had “broken down.”

Like many emerging markets suffering from volatile currency, bond and equity markets, Mr. Rajan fingered central banks in advanced economies as a leading source of turmoil in international capital markets. The Fed’s gradual exit from its bond-buying program has contributed to major selloffs by investors who were already wary about developing economies sustaining high growth rates.

The Federal Reserve didn’t address the turmoil when it announced last week another reduction in its bond-buying program.

Ms. Lagarde said the proliferation of global financial and trade linkages over the past decade, combined with the emergence of the major developing economies, requires greater global collaboration. She called it “a new multilateralism.”