Fed hikes need to be gradual - IMF chief
Further interest rate hikes by the US Federal Reserve should be
gradual or they risk hurting already fragile emerging economies, where
many companies borrow in dollars, the head of the International Monetary
Fund said on Tuesday.
Christine Lagarde said a tightening in US monetary policy, which
started last month with the first rate hike in a decade, should be
supported by "clear evidence" of inflation in the United States. She
highlighted the negative implications for emerging economies.
"The key issue going forward will be the pace of normalisation. We
agree that it should be gradual as announced, as stressed actually by
the Fed, and based on clear evidence of firmer wage or price pressures,"
she told a central banking conference in Paris.
Ebbing confidence in China's policymaking has fuelled investors'
retreat from the slowing economy and other emerging markets, which had
attracted hundreds of billions of dollars over the previous decade
thanks to their superior returns over sluggish developed economies.
Lagarde said higher US rates, combined with easing in the euro zone
and Japan, could push up the dollar, making life harder for the many
companies in emerging economies that borrow in dollars.
- IMF |