MUMBAI — The volatility that hit emerging markets after the U.S. Federal Reserve’s 2013 announcement that it was preparing to tighten monetary policy could return when the Fed actually starts raising rates, the head of the International Monetary Fund warned Tuesday.
“I am afraid this may not be a one-off episode,” Christine Lagarde said in a speech at India’s central bank. “This is so because the timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets.”
Lagarde added that what she called “the taper tantrum,” which riled Asian markets and sent currencies in the region down against the dollar, could be worse the next time around because of the large amount of liquidity in the global financial system.
