In a blog post, the director of the fund’s Monetary and Capital Markets Department Tobias Adrian warned that vulnerabilities to the financial system are rising, urging policy makers to “act now” and address them.
According to Adrian, easy central bank policy is “breeding complacency and allowing a further build-up of financial excesses”.
He added: “Non-financial borrowers are taking advantage of cheap credit to load up on debt. Investors are buying riskier and less liquid assets. If left unattended, these growing vulnerabilities will continue to mount, threatening to derail the economic recovery when shocks occur.”
Financial markets are at an increasing risk of violent market correction because of “too much money chasing too few high yielding assets,” he said. “The result is that investors are taking more risks and exposing themselves to bigger losses if markets tumble.”