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IMF says Fed tightening appropriate, adds to risks for emerging markets -Breaking

by Mike Robinson

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© Reuters. FILE PHOTO – The Federal Reserve Board Building on Constitution Avenue in Washington, U.S.A, March 19, 2019, REUTERS/Leah Millis

WASHINGTON (Reuters] – While the U.S. Federal Reserve acts “appropriately”, to tighten monetary policies and signal a higher rate path in future rates, this policy shift can pose risks for countries that depend on dollars funding. Gerry Rice, IMF spokesperson said on Thursday.

Rice spoke at an IMF regular news conference, a day following the Fed raising interest rates by 25% for the first-time since 2018. This was due to the wide range of post-pandemic economic conditions and the effects from war in Ukraine.

Rice explained that a clear and consistent forward guidance, which responds proportionately with data changes will keep inflation expectations stable. Rice said that the Fed’s faster rate of normalization raises risks for other countries dependent on dollars funding, particularly in developing and emerging economies.

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