Short-term growth policies risk new financial crisis, IMF warns

Fund says debts set to build up as central banks remove threat of higher interest rates

Central banks are running the risk of a severe financial crisis through policies aimed at boosting short-term economic growth, the International Monetary Fund has warned.

In its half-yearly global financial stability report, the IMF said the removal of the threat of higher interest rates had prompted a rapid recovery in financial markets after last autumn's turbulence but would lead to a fresh buildup in already high levels of debt.

A more pronounced global slowdown could lead to falling asset prices due to a weaker outlook for corporate profits, notwithstanding attempts by central banks and finance ministries to provide stimulus.

An unexpected shift to a more aggressive approach to raising interest rates in the leading industrial countries might lead to falling share prices if investors felt they had taken a too-benign view of the stance of monetary policy.

Political and policy risks, such as an escalation of trade tensions or a no-deal Brexit, could affect market sentiment and make investors more risk averse.