NEW YORK (TheStreet) -- The International Monetary Fund urged nations to move beyond their dependence on stimulus programs and warned of financial stability risks, as investors look to the release of Federal Reserve minutes Wednesday for clues on central bank decision-making
In its global financial stability report, the body called for "strong action" from policymakers to facilitate a shift from markets driven by low interest rates in advanced nations to self-sustaining growth.
"[Advanced] economies will need to reduce their reliance on monetary and liquidity supports if they are to create an environment of self-sustaining growth, marked by increased corporate investment and growing employment," Jose Vinals, financial counselor and head of the IMF's Monetary and Capital Markets Department, said in a statement on Wednesday.
The Federal Reserve wound down its stimulus program for the third time to $55 billion a month in March. All eyes Wednesday will be on the release of meeting minutes at 2 p.m. Wednesday for clues on its likely policy path.
The IMF pointed to several perceived risks in the U.S., highlighting high-yield bonds and leveraged loans, where it said underwriting standards had weakened.
It said the rapid growth of credit-focused mutual funds and exchange-traded funds (ETFs) could also amplify any shocks. "These investment vehicles are more prone to sudden redemptions from investors than other traditional holders of leveraged loans," the IMF said. "The concern is that if investors seek to withdraw massively from investment vehicles focused on relatively illiquid high-yield bonds or leveraged loans, the pressure could lead to fire sales in credit markets and rapid increases in yields."