High inflation in the United States can lead to a tougher response than expected by the central bank of the United States. Shivering through financial markets And the International Monetary Fund warned that it would endanger vulnerable countries.
The IMF said emerging market countries need to be prepared for muscular action from the US central bank, in addition to growing concerns about the sharp rise in price pressures registered around the world. Federal Reserve..
The Washington-based IMF said, “For most of last year, investors have priced a temporary rise in inflation in the United States due to the slow recovery and slow supply bottlenecks.” Stated. Blog post..
“Now, sentiment has changed. Prices are rising at the fastest pace in almost 40 years, and tight labor markets are starting to lead to higher wages. The new Omicron variant is supply pressure on inflation. The Federal Reserve Board referred to inflation trends as a key factor in last month’s decision to accelerate tapering of asset purchases. “
With inflation above 6% and at its highest level in almost 40 years, financial markets believe the Fed will quadruple interest rates in 2022 and sell bonds in a process called quantitative monetary tightening. ..
Higher US borrowing costs usually lead to a stronger dollar, which increases the cost of debt repayment for emerging market countries that borrow heavily in currencies. The slowdown in US growth caused by rising interest rates will also affect exports to the world’s largest economy.
The IMF said it expects US inflation to fall by the end of the year, but expects further upward pressure on living costs as widespread wage increases or sustainable supply bottlenecks lead to higher prices. He emphasized that it could be increased.
“If the Fed’s rate hikes accelerate accordingly, financial markets could be shaken and the global financial situation could be tougher,” the IMF said. “These developments can be accompanied by a slowdown in US demand and trade, which can lead to capital outflows and currency depreciation in emerging markets.”
Higher outlook U.S. interest rates Stock prices have fallen since the beginning of 2022.
Deutsche Bank analyst Jim Reed said: The presented variant.
“But the holiday season provided more evidence that Omicron was significantly milder, especially among vaccinated people. As a result, the market did this more than it had hoped before Christmas. Investigate, and at the same time the Fed has grown even more. Hawks by raising the ante of quantitative tightening. So a perfect storm. “
Rising US interest rates could hurt vulnerable countries, the IMF warns | International Monetary Fund (IMF)
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