Annoying Warning from IMF: Get Ready for Rapid Interest Rate Increases, Currencies Will Depreciate

IMF warned developing countries about FED. Noting that developing economies should be prepared, the IMF stated that there may be a depreciation in currencies.

The International Monetary Fund (IMF) warned the Fed for emerging markets. IMF stated that the economies of developing countries should prepare themselves for the interest rate increase from the FED; the faster-than-expected interest rates to volatility in financial markets and capital outflows; He noted that may cause depreciation in currencies . Noting that the economy of the United States will continue to grow sharply, the IMF stated that the slowdown in inflation will occur towards the end of the year. IMF stated that the gradual tightening of the US policy will have a ‘mild’ effect on developing countries; He also stated that large-scale wage inflation or ongoing supply chain problems may increase prices more than anticipated and inflation expectations may rise.

“Rapid rate hike may shake the markets”

Ekonomi Stating that this situation may lead to a faster tightening of the FED, the IMF also touched upon the rapid interest rate rise and the COVID-19 pandemic, “Emerging economies will face economic turbulence must be prepared. Rapid interest rate hikes may shake the markets and global financial conditions may tighten. The demand of the USA may slow down and this may trigger capital outflows and depreciation of currencies in developing countries”. In addition to these, IMF stated that countries with strong inflationary pressures should increase interest rates ; On the other hand, he emphasized the importance of the Central Banks’ need to be in open and continuous communication for their tightening policy plans. Earlier, St. Louis FED President James Bullard also said that the FED should start increasing interest rates as of March before forecasting in order to fight inflation.

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