The lack of financial assets that can be turned effectively into cash could "make for a bumpy ride" when the Federal Reserve begins to raise short-term rates, said Christine Lagarde, the managing director of the International Monetary Fund, on Thursday. "Liquidity can evaporate quickly if everyone rushes for the exit at the same time," Lagarde said in remarks prepared for delivery to the Atlantic Council. The IMF managing director said that global financial stability risks are rising even as global growth remains moderate. "The 'new mediocre' growth environment is not a comfortable place with respect to financial stability," Lagarde said. For instance, low rates can foster a higher risk tolerance on the part of investors, and businesses in emerging-market economies are wedged between the strong U.S. dollar, lower commodity prices, and higher borrowing rates, she said.
Copyright © 2015 MarketWatch, Inc.