In a not-so-veiled warning of a coming financial crash, the International Monetary Fund admonished today that emerging markets could be seriously affected once the U.S. Federal Reserve starts to tighten monetary policy—especially countries with high inflation. They warn capital could be rapidly withdrawn from these countries. (https://blogs.imf.org/2022/01/10/emerging-economies-must-prepare-for-fed-policy-tightening/)
Posting on its blog, the IMF said: “Broad-based U.S. wage inflation or sustained supply bottlenecks could boost prices more than anticipated and fuel expectations for more rapid inflation. Faster Fed rate increases in response could rattle financial markets and tighten financial conditions globally. These developments could come with a slowing of U.S. demand and trade and may lead to capital outflows and currency depreciation in emerging markets.”
