By Paul Kiernan

WASHINGTON--The International Monetary Fund urged major economies on Wednesday to prepare fiscal policies to combat the next downturn, as economists have warned that low or negative interest rates will likely hamper central banks' ability to respond by lowering borrowing costs.

"Major economies should be prepared for coordinated action in case of a severe downturn," Vitor Gaspar, director of the IMF's fiscal-affairs department, said in remarks prepared for delivery at a press conference on its semiannual Fiscal Monitor report. "The time is now for countries with budgetary room to use it to support aggregate demand."

Major central banks have taken steps in the past six months to counter deepening concerns about the economic outlook through a combination of stimulus measures. The U.S. Federal Reserve has lowered interest rates this year for the first time since 2008, while the European Central Bank has cut borrowing costs further below zero and announced plans to restart bond purchases.

Economists say the moves have limited the amount of stimulus central banks can pump into the economy in a downturn.

But another result is that $15 trillion of bonds globally have negative yields, the IMF noted in a separate report Wednesday. Investors, anticipating rates to remain low for longer than they expected earlier this year, have sought better returns in some cases by placing risky bets that could turn sour in an economic downturn, the IMF said in its semiannual Global Financial Stability Report.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

October 16, 2019 09:44 ET (13:44 GMT)