“Faster Fed rate hikes could rattle financial markets, result in slowing US demand and capital outflows from emerging markets,” International Monetary Fund (IMF) said in a blog post published on Monday.
Key takeaways
Broad wage inflation or sustained supply bottlenecks could boost US prices more than expected, trigger faster-Fed rate increases.
Continues to expect robust US growth, sees inflation moderating later this year.
Expect global recovery to continue in 2022 and 2023, but risks remain elevated by the resurgent pandemic.
Emerging markets with stronger inflation pressures or weaker institutions should act swiftly to let currencies depreciate and raise benchmark interest rates.
Market reaction
These concerning remarks from the IMF have had little impact on the market, as of writing. The risk tone remains tepid amid China concerns and Fed speculation heading into the critical US event risks – Fed Chair Powel’s testimony and inflation data.
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