Lagarde calls for more crisis "lines of defence" The world needs to build "further lines of defence" against a possible emerging markets crisis but the International Monetary Fund stands ready to provide financial support if needed, its managing director Christine Lagarde said on Friday. Ms Lagarde's remarks to the Kansas City Fed's annual gathering in Jackson Hole, Wyoming, are a sign of growing concern among international policy makers about market turmoil in countries such as Brazil, India and Indonesia. "Even with the best of efforts, the dam might leak," Ms Lagarde told the central bankers gathered for the conference. So we need further lines of defence - lines of defence that reflect our interdependence, our common purpose, and our mutual responsibility for the global economy. "For the Fund's part, we stand ready to provide policy advice and financial support, including on a precautionary basis through our various instruments," she said. The Fund has a range of precautionary tools that will fund governments if they lose the ability to borrow from markets, such as standby arrangements and flexible credit lines. Setting them up in advance of a crisis is intended to stop a crisis happening. Ms Lagarde did not mention any specific country, suggesting that no action is imminent. But her reference to the Fund's tools suggests that she thinks they may be needed if problems in emerging markets get worse. The potential tapering of Fed asset purchases from $85bn a month has pushed up US interest rates and led to falling currencies in emerging markets as capital flows back to the developed world. The Indian rupee, the Brazilian real, the Turkish lira, the South African rand and Indonesia's rupiah have all weakened substantially since May, prompting a variety of responses from governments and central banks. In the most decisive yet, Brazil unveiled a $60bn currency intervention programme on Thursday. In the absence of Fed chairman Ben Bernanke, emerging market wobbles are becoming one of the main themes of the Fed's annual symposium in Jackson Hole. Agustín Carstens, governor of the Bank of Mexico, called on developed countries to implement a more predictable exit from easy monetary policy and to co-ordinate as much as possible in order to make life easier for emerging markets. "Reversals have happened and they could become much larger in the future," said Mr Carstens. He said that the volatility of capital flows to emerging markets had been a problem since the crisis and affected by unconventional monetary policy. The Fed's talk about tapering led to a big shift in capital flows and emerging market yield curves, Mr Carstens said. Countries with relatively weaker fundamentals have been affected the most. "Exchange rate flexibility will help, but not at all cost," said Ms Lagarde. Some market intervention may help moderate exchange rate volatility or short-term liquidity pressures. She also called for the use of macroprudential policies to halt frothy credit growth in emerging markets. "In some circumstances, capital flow management measures have been useful," she said. There is scope for international policy co-ordination and co-operation to improve global outcomes. No country is an island," said Ms Lagarde. As I said at the outset, in today's interconnected world, the spillovers from domestic policy . . . may well feed back to where they began. Looking at the wider effect is in your own self-interest. It is in all of our interests.