Image: Reuters Berita 24 English - A senior International Monetary Fund (IMF) official said that several Asian central banks must quickly r...
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| Image: Reuters |
Berita 24 English - A senior International Monetary Fund (IMF) official said that several Asian central banks must quickly raise interest rates because of rising inflation. This is because the war in Ukraine has caused food and fuel prices to rise around the world.
In a blog post on Thursday, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said, "Asia's rising inflation pressures are still less severe than in other parts of the world, but price increases in many countries have been going above central bank targets."
"Several economies will need to raise rates quickly because inflation is spreading to core prices, which don't include food and energy, which are more volatile," he said. "This is to stop inflation expectations and wages from going up in a spiral that would later require bigger rate hikes to fix if it isn't stopped."
Srinivasan said that most emerging Asian economies had lost money in a way that was similar to what happened in 2013, when global bond yields went up after the U.S. Federal Reserve gave hints that it might stop buying bonds sooner than expected.
He wrote that $23 billion had moved out of India since Russia invaded Ukraine. This was a very large amount. South Korea and Taiwan also saw money leave their economies.
Tightening monetary conditions would make things worse for some Asian economies whose finances were already getting worse. It would also make it harder for policymakers to use fiscal spending to soften the economic blow of the pandemic.
Asia's share of the world's total debt went from 25% before the global financial crisis to 38% after COVID. This made Asia more vulnerable to changes in the world's financial situation, Srinivasan said.
He also said that some Asian countries might need to use things like foreign exchange interventions and capital controls to stop large amounts of money from leaving the country.
