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PARIS, June 25 (Reuters) - The U.S. Federal Reserve's talk
of exiting its stimulus programme could trigger volatility on
global markets, the IMF's chief economist warned on Tuesday,
adding that recent movements had been exaggerated.
Olivier Blanchard said the problem was that the rules for
exiting quantitative easing were not clear and the Fed could not
make commitments in terms of quantities.
Fed Chairman Ben Bernanke said last week that the central
bank expected to reduce its bond-buying later this year and halt
the stimulus programme altogether by mid-2014 if the economy
improves as forecast.
Global equities, bond prices and commodities tumbled as a
result, also hit by a cash crunch in China.
"This is an economy that is recovering, the issue is around
the speed of exit from QE," Olivier Blanchard told a meeting of
the Institute of International Finance in Paris.
"Conceptually it is not fundamentally very difficult, but
there is a problem of communication on how you do it, which is
going to create volatility. But the volatility we have seen in
the past week is exaggerated."
He added: "The Fed has no clue what will happen when it
starts selling assets ... So it cannot make any commitments in
term of quantities."
A late recovery in Chinese stocks and comments by top
Federal Reserve officials that eased fears of an imminent end to
its stimulus lifted shares and bonds off their lows on Tuesday
and cooled a rally in the dollar.
Earlier this month, the International Monetary Fund
recommended that the Fed stick to its bond-buying programme at
least until the end of the year.
(Reporting by Ingrid Melander and Steve Slater; Writing by
Natalie Huet; Editing by Catherine Evans)