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IMF chief Kristalina Georgieva has said higher US interest rates were not great news for the rest of the world and could become a worry if they continued for a long time, but she thought the US Federal Reserve was acting prudently.
Georgieva, speaking at an event hosted by the Atlantic Council last week, said the US government could also look at taking other measures to ensure that the US economy was not overheating, but gave no details.
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“Higher interest rates for the rest of the world is not great news. Higher interest rates make the US more attractive so financial flows come here and that leaves the rest of the world somewhat struggling,” she said.
Higher rates also drove the value of the dollar higher, which meant other countries’ currencies were weaker.
“If it continues for a long time, it could become a bit of a worry in terms of financial stability,” she said.
Consumer level inflation data for March released on Wednesday was unexpectedly strong, casting further doubt on the Fed’s current forecast of rate cuts at some point later this year.
The unfavourable price pressure data comes as other reports also pointed to sturdier inflation over the start of the year, challenging the Fed’s most recent projections that pencilled in three rate cuts this year.
Minutes from the US Federal Reserve showed officials worried that progress on inflation may have stalled, and a longer period of tight monetary policy would be needed to tame it in the world’s largest economy.
Investors who had earlier expected a rate cut in June now see September as a likelier timing for the easing cycle to begin, following a third consecutive stronger-than-forecast reading on consumer inflation. – CNBC Africa
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