IMF chief Christine Lagarde said Friday that central bank stimulus is still needed for the global economy, and warned of unknown risks as it is drawn in.
"The day will come when this period of exceptionally loose monetary policy... must end," she said in a speech to a global gathering of central bankers hosted by the US Federal Reserve in Jackson Hole, Wyoming.
"We need to plan for that day, especially since we do not know exactly when it comes," said Lagarde, the managing director of the International Monetary Fund, according to the prepared text.
"Just as with entry, exit will take us into uncharted territory."
Speaking as the Fed's plans for slowing its $85 billion a month bond-buying program have roiling especially emerging economy markets, Lagarde said such "unconventional monetary policy" (UMP) approaches remained important.
"Let me say it up front: I do not suggest a rush to exit. UMP is still needed in all places it is being used, albeit longer for some than for others."
She said specifically that both Europe and Japan still have much to gain from such programs, which mostly aim to enhance growth by pressing interest rates lower.
But she said the IMF and policy makers should be thinking about the ramifications of reeling in easy-money programs and other unconventional operations, like providing detailed guidance on what central bankers are thinking about the future.
"That includes the implications for global economic and financial stability: the whole system, not just one part of it."
Lagarde noted that the prospect of the Fed and other central banks slowing stimulus programs had already sent bond prices tumbling, and acknowledged the turmoil that has resulted: emerging market countries have seen an acceleration in capital outflows and sharp pressure downward on their currencies.
"We all know that the situation can turn quickly -- as we have seen in recent days in some emerging market economies. These risks require constant monitoring and reassessment," she said.
"The equally important issue, however, is what to do if faced with renewed financial instability. This presents serious risks to the non-UMP economies."
Such countries need to "vigorously" pursue policies that will strengthen their economies for the medium term.
Their central banks need to hold generally to flexible exchange rates, too, but she said that "some market intervention" is useful to ease extreme pressures.