WASHINGTON - The International Monetary Fund (IMF) said on Tuesday that US fiscal stimulus, the sweeping tax cuts and increased government spending, could raise the risk of an upward surprise in US inflation and trigger financial market volatility.

"At the current stage of the business cycle, the expansionary fiscal policy stance, while boosting US and global output in the near term, could increase risks and uncertainties in the medium term," the IMF's executive directors said in a statement on its annual check-up of US economic policies.

"They pointed to an inflation surprise as an important risk that, if realized, could create volatility in financial markets, with negative global consequences," the IMF said, noting that emerging markets with weaker macroeconomic fundamentals could face the risk of a marked reversal of capital flows.

The IMF estimated that core US inflation would rise modestly above the Federal Reserve's target of 2 percent by mid-year and the central bank is likely to accelerate the pace of interest rate hikes.

The Fed last month raised short-term interest rates by a quarter of a percentage point and envisioned two more rate hikes in the second half of the year.

The IMF's executive directors also raised "significant concerns" over the Trump administration's recent trade policy proposals that could have damaging effects beyond the US economy, trigger retaliatory responses, and undermine the open, fair, rules-based multilateral trading system.

The Trump administration has recently unilaterally imposed high tariffs on steel and aluminum imports on the grounds of national security, which has drawn strong opposition from the domestic business community and major US trading partners.

"Directors urged the authorities to work constructively together with their trading partners to reduce trade barriers and resolve trade and investment disagreements without resorting to harmful unilateral actions," said the IMF.