IMF Says Fed Surprises Can Trigger Emerging-Market Outflows
- World could see similar reaction to 2013’s ‘taper tantrum’
- IMF underlines need for clear central bank communication
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The International Monetary Fund warned that a potential surprise tightening by the U.S. Federal Reserve could spur an increase in interest rates and capital outflows from emerging markets, underlining the need for clear central bank communication.
Rising market interest rates in the U.S. so far have been driven by positive news on economic prospects and Covid-19 vaccines, which tends to boost portfolio inflows and lower spreads on U.S. dollar-denominated debt for most emerging markets, the IMF said Monday in an analytical chapter of its World Economic Outlook.