The International Monetary Fund (IMF) said emerging market countries need to prepare for the rise in US interest rates linked to the Federal Reserve’s new policy, according to a blog note published this Monday.
The US financial markets have increased the interest rate to over 6%, the highest level in almost 40 years, according to US media outlet the Guardian.
This increase is mainly due to the Federal Reserve’s new strategy that has modified its monetary policy strategy to accommodate structural changes in the economy, committing itself to temporarily tolerating inflation rates and an inclusive view of the labor market.
The IMF said in its blog note that this increase is linked to unsteady economic recovery and a slow unraveling of supply bottlenecks.
Additionally, the US could destabilize the financial markets and encourage capital outflows as well as a depreciation of certain currencies.
The Fund believes that a widespread wage hike in the US or the persistence of bottlenecks in supply chains could lead the Fed to hike the interest rate.
The IMF is expected to publish new economic forecasts on January 25, already warning about the rise, especially with the circumstances related to the health situation, mainly linked to the new Omicron variant.
“Emerging economies should prepare for potential bouts of economic turbulence,” the IMF concluded in its blog note.
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