International Monetary Fund Managing Director Christine Lagarde Sunday warned of further market and economic pain if U.K. and European policy makers don't quickly provide investors certainty about the new state of their relationship in the wake of Britain's decision to leave the European Union.

The extent of the economic and market fallout "will depend on the level of certainty or uncertainty" officials can give as they negotiate a new political, trade and economic relationship.

Ms. Lagarde, speaking at the Aspen Ideas Festival in Colorado, said she has encouraged officials "to proceed in the most efficient, productive way in order to reduce uncertainty."

Global markets sold off Friday as U.K. voters surprised investors by deciding to leave the EU. The decision opens the door to the first exit of a country from the union in its history. It has fueled worries that other countries may follow, potentially leading to the disintegration of the post-World War II European project.

Ms. Lagarde said there will likely be more market volatility and economic turmoil ahead.

The selloff, particularly the British pound, was a "violent, brutal, immediate, massive move, but there was no panic," Ms. Lagarde said.

That was partly because of the way policy makers responded, she said. This market selloff isn't like the financial crisis, she added.

"Central banks did their job, and put a lot of liquidity into the market," the IMF chief said.

Investors are uncertain about the future direction of the EU-U.K. negotiations and the subsequent impact on their economies.

Policy makers "are holding the uncertainty in their hands," she said.

It is unclear when the U.K. will formally start the exit process, and EU officials are giving mixed signals about the timing and nature of the process.

If the U.K. follows through and exits the EU, Ms. Lagarde said there is "no doubt it will have an impact" on the U.K. and EU economies.

Personally, the former French finance minister said the exit was "a heartbreak for those of us who are truly European."

Write to Ian Talley at ian.talley@wsj.com

(END) Dow Jones Newswires

June 26, 2016 20:45 ET (00:45 GMT)

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