IMF sees emerging economies vulnerable to US tapering

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SummaryAdvanced economies led by the US will increasingly drive global growth while emerging countries are at risk of slowing due to tighter US monetary policy, the International Monetary Fund said in a note obtained by Reuters on Wednesday.

Advanced economies led by the US will increasingly drive global growth while emerging countries are at risk of slowing due to tighter US monetary policy, the International Monetary Fund said in a note obtained by Reuters on Wednesday.

In the surveillance note, prepared for the Group of 20 meeting in St. Petersburg, the IMF urged strengthened global action to revitalise growth and better manage risks, warning that some downside risks have become more prominent.

Emerging economies are seen particularly vulnerable to a tightening of US monetary policy and the IMF recommended that policy makers be ready to handle a rise in financial instability.

“Policy makers should allow exchange rates to respond to changing fundamentals but may need to guard against risks of disorderly adjustment, including through intervention to smooth excessive volatility,” the IMF said.

The US Federal Reserve may start tapering its stimulus programme as early as this month. The next Fed policy meeting is set for September 17-18.

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