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

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FILE PHOTO: The IMF logo is seen outside the headquarters building in Washington

WASHINGTON – The U.S. Federal Reserve is acting “appropriately” to tighten monetary policy and signal a higher future rate path, but the policy shift does bring risks for emerging market countries dependent on dollar funding, IMF spokesman Gerry Rice said on Thursday.

Speaking at a regular IMF news conference a day after the Fed raised interest rates by a quarter percentage point for the first time since 2018, Rice said that countries would have a more difficult time assessing the policy impacts of the Fed move, due to widely differing post-pandemic economic circumstances and effects from the war in Ukraine.

Continuing to give clear forward guidance that reacts proportionately to shifts in the data will help keep inflation expectations anchored, Rice said. “This faster pace of Fed normalization increases the risks faced by other countries reliant on dollar funding, especially in emerging and developing economies.”

(Reporting by David Lawder and Andrea Shalal; Editing by Chizu Nomiyama)

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