Lagarde Says Financial Crisis in US Possible

The International Monetary Fund’s Managing Director Christine Lagardehas said that she would not rule out another financial crisis in the US in her lifetime, indicating that comments made recently by Federal Reserve Chair Janet Yellen may have been premature.

“There may, one day, be another crisis,” Lagarde told CNBC Tuesday on the sidelines of a joint conference with the IMF and the Croatian National Bank in Dubrovnik. Her comments responded to a statement made by Yellen a fortnight earlier in which she said she does not expect to see another financial crisis in her lifetime.

“….because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde said. She, however, noted the unpredictability of financial crises and said that finance ministers and policymakers should act with caution to prepare for such eventualities.

“Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” she added.

“Our duty, and certainly the message that we give to the finance ministers, to the policymakers, is ‘be prepared’. Make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis.”

Janet Yellen is to outline her Monetary Policy Report to Congress later Wednesday in a meeting which is also likely to also pose questions about the Fed’s “tapering” plans and her own future at the central bank.