IMF welcomes Federal Reserve’s latest monetary policy stance
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The International Monetary Fund (IMF) is today (December 17) welcoming the US Federal Reserve’s decision to more quickly end its pandemic stimulus measures in the face of rising inflation.
Commenting on the Fed’s latest monetary policy stance, IMF Spokesman, Gerry Rice remarked, “The Federal Reserve has announced a well-calibrated, proportionate response to rising wage and price pressures by accelerating the reduction in its asset purchases and signalling a more front-loaded path for the federal funds rate.”
He is recommending that the US central bank continue to set policy based on economic data while also signalling its intentions in advance.
The Federal Open Market Committee (FOMC) at the conclusion of its two-day meeting on Wednesday decided to accelerate the pace of the rollback of its monthly bond-buying programme.
The FOMC contended that the bond-buying programme must finish before it would consider raising interest rates from zero.
Emerging markets faces risks from move
However, the IMF spokesman is raising the red flag as it regards emerging market risks, particularly among poorer countries. According to Rice, “This faster pace of Fed normalisation does increase the risks faced by countries relying on dollar funding, especially emerging and developing economies.”
He argues that an abrupt increase in interest rates would raise the debt costs of a number of emerging countries, which are otherwise lagging behind in the global economic recovery from COVID-19.
- Related article: US Fed maintains benchmark interest rate
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