International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during a briefing on the global policy agenda at IMF headquarters during the IMF-World Bank Spring Meetings in Washington, DC on April 18, 2024.
Almond Ngan | Afp | Getty Images
Kristalina Georgieva, managing director of the International Monetary Fund, played down the prospect of negative impacts from a monetary policy divergence between Europe and the United States, but said the problems could be more acute in emerging markets.
Key interest rates in most advanced economies have surged in recent years as central banks sought to curb inflation in the wake of the Covid-19 pandemic. Those banks are now trying to cut rates again as the economy cools, although signals in the U.S. suggest rate cuts could be several months away.
A high U.S. interest rate environment is traditionally bad news for emerging markets because it makes their debt – often priced in U.S. dollars – more expensive. It may also lead to capital outflows as investors seek better returns in the US and may result in significantly tighter financial conditions.
“It’s a much more serious problem for countries where the impact of high interest rates in the United States is more pronounced – in many emerging markets,” Georgieva told CNBC’s Silvia Amaro in Brussels on Monday.
“We’re seeing some of this in Japan as well, and that’s where policymakers’ attention really needs to be sharpened to watch closely where the volatilities are becoming more significant. This is not the case in Europe.”
In the euro zone, she said that “we are not too worried about the impact of the exchange rate,” adding that the IMF’s analysis showed that the difference between the US Federal Reserve’s interest rates and those of the European Central Bank “of 50 basis points is likely to result in a small or 0.1 to 0.2% shift in the exchange rate.”
“And that means here [in Europe] “It’s not a big problem,” she said.
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2024-04-30 07:59:11
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