Faster cut of stimulus by Fed is ‘well-calibrated’ response to price pressures, says IMF

The announcement of an accelerated reduction in bond purchases by the US central bank is a “well-calibrated” response to rising wage and price pressures, but it raises risks for emerging markets, said an IMF (International Monetary Fund) spokesman. ) Gerry Rice this Thursday (16).

Rice said at a news conference a day after the Fed’s announcement that the faster pace of normalization of monetary policy heightens risks faced by emerging markets and developing countries that depend on dollar financing .

“The Federal Reserve has announced a well-calibrated and proportionate response to rising wage and price pressures by accelerating the reduction in asset purchases and signaling an earlier path on interest rates,” Rice said. “Continuing to shape monetary policy in a data-dependent fashion will help keep inflation expectations anchored.”

“However, this faster pace of Fed normalization increases the risks faced by countries that depend on dollar funding, especially emerging and developing economies,” Rice said.

The IMF has become more concerned in recent weeks that inflation will lead to a more abrupt tightening of monetary policy in advanced countries and has called on central banks to curb inflation before price/wage spirals set in.