IMF's Strauss-Kahn: Policymakers May Jeopardize Recovery By Exiting Stimulus Measures Too Early

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Friday, Managing Director of the International Monetary Fund, Dominique Strauss-Kahn said he sees a real danger that policy makers may jeopardize the recovery by exiting from crisis measures too soon. But, he said it is the right time for policy makers to formulate their exit strategies.

Speaking at the sixth annual Bundesbank Lecture in Berlin, Strauss-Kahn said, "Given the fragility of the recovery, there are risks that it could stall."

He sated that premature exit from accommodative monetary and fiscal policies is a principal concern. In addition, problems in the financial sector could persist or even intensify further, particularly if efforts to restore banks to health are not completed.

Moreover, he said he is concerned about higher unemployment, which he calls the third phase of this crisis. "We expect unemployment to continue rising through next year, as economic growth falls short of potential. And a jobless recovery remains a risk."

"Having so many people out of work has significant economic costs, ranging from lower private demand to a decline in potential growth if structural unemployment rises. The social consequences are potentially even more worrisome."

Strauss-Kahn said for these reasons, "I believe that policy makers should err on the side of caution as they decide when to exit from their crisis response policies."

Friday, Managing Director of the International Monetary Fund, Dominique Strauss-Kahn said he sees a real danger that policy makers may jeopardize the recovery by exiting from crisis measures too soon. But, he said it is the right time for policy makers to formulate their exit strategies. (Market News Provided by RTTNews)