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WASHINGTON (Reuters) - The International Monetary Fund's top official for financial system stability said current market optimism is based on a "benign" view of policy plans going forward, particularly in the United States, and things might not go as expected.
"The downside risks arise from deviations from the expected path of future policy," said Adrian, a former research director at the Federal Reserve Bank of New York. "We highlight particularly two such risks, from fiscal expansion that would lead to a higher and faster rise in interest rates, and a shift to inward-looking policies that could lead to a decline in global growth."
He also said while the U.S. corporate sector is generally healthy, debt levels are at historically high levels and there is a "tail of weaker firms" holding about $4 trillion in debt that
"If policies go unexpectedly badly, some part of the corporate sector might be exposed to these unexpected shocks, Adrian said.
(Reporting by David Lawder; Editing by Chizu Nomiyama)
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