The International Monetary Fund (IMF) warns that if the Federal Reserve and other central banks accelerate the withdrawal of ultra-loose monetary policies, global stock markets and house prices are at risk of sudden collapses, and in the worst case, housing prices in developed economies may drop sharply. 14%, housing prices in emerging market economies are more likely to plummet by 22%.
The IMF released its semi-annual Financial Stability Report (FSR) on Tuesday (12th), stating that the ultra-loose monetary policy has led to “partial market prosperity and rising financial leverage”, which may put economic recovery at risk due to credit crunch.
Tobias Adrian, Director of the IMF’s Monetary and Capital Markets Department, said: “The shock may come from the central bank if they tighten policy faster than originally expected. Judging from the current high valuations, we are worried that there may be a large-scale sell-off.”
He also added that inflationary pressures are “unseen before,” making the tasks of central banks more complicated.
Although the IMF agrees with the central banks’ views on temporary inflation, Adrian warned that there are some variables in this forecast, and it makes people “question marks” about how policymakers should respond to the financial market crash.
The IMF named three financial stability mines in the report, namely the stock market, the housing market,Cryptocurrency。
For the stock marketAccording to the IMF, the “stock price mismatch” caused by the surge in the past 18 months is quite common, and the stock price has risen too high relative to economic fundamentals.If the economic outlook is suddenly reassessed or there is an unexpected change in policy, the stock price may fall sharply。」
In the housing market, the IMF stated that the risk of housing prices falling is high. In the worst case, housing prices in developed economies may plummet by 14%, and housing prices in emerging markets plummet by 22%.. The only good news is that although the current level of housing price increases is comparable to the 2007-08 financial crisis, the financial system is now much more healthy.
As forCryptocurrency, The IMF stated that this market urgently needs supervision, and the current information disclosure and supervision are insufficient, putting consumers at risk of fraud and market integration.
CurrentlyCryptocurrencyMarket size 2 trillionDollar, Is much smaller than the stock and bond market, so it does not pose a risk to the stability of the global financial system, but in order to mitigate future risks, it needs to be supervised.