"With inflation running below many central banks' targets, we see rising risks of deflation, which could prove disastrous for the recovery," IMF Managing Director Christine Lagarde said in a speech at the National Press Club.
"If inflation is the genie, then deflation is the ogre that must be fought decisively," she said.
"The IMF is planning to upgrade its forecast for global growth in its latest economic assessment due out next week.
But despite an acceleration in U.S. growth and euro zone output turning positive after two years of contraction, Ms. Lagarde said global growth "is still stuck in low gear" and below its 4% potential rate".
That means it's critical that the Fed avoids "premature withdrawal of monetary support," she said. The Fed plans to start exiting its $85 billion monthly bond purchases in January, and many economists expect a full end to the program by the end of the year.
For the euro area, the ECB could do more to spur growth, including through targeted lending, the IMF chief said.
"Central banks should return to more conventional monetary policies only when robust growth is firmly rooted," Ms. Lagarde added.
As the Fed exits its QE, emerging markets must be wary of asset bubbles and rising debt in their economies.
There are still rough waters ahead.
