International Monetary Fund (IMF) Managing Director Kristalina Georgieva at IMF headquarters during the IMF/World Bank Spring Meetings on April 18, 2024 in Washington, DC. Speaks at briefing on global policy agenda.
Mandel Yan | AFP | Getty Images
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), played down the prospect of negative consequences from the divergence in monetary policy between Europe and the United States, but said the problems in emerging markets may be more serious.
Benchmark interest rates have surged in most developed economies in recent years as central banks aim to curb inflation in the wake of the Covid-19 pandemic. The banks are now looking to lower interest rates as the economy cools, although signals from the United States suggest a rate cut may still be months away.
The high interest rate environment in the U.S. has traditionally been bad news for emerging markets because it makes emerging market debt (usually denominated in U.S. dollars) more expensive. It could also trigger capital outflows and potentially lead to tighter financial conditions as investors seek better returns in the United States.
“This is a more serious problem for countries where the impact of high U.S. interest rates is more profound — in many emerging market economies,” Georgieva told CNBC’s Sylvia Amaro in Brussels on Monday. in the body.
“We’re seeing some of this in Japan as well, and policymakers’ attention really has to increase to carefully monitor where volatility becomes more severe. In Europe, that’s not the case.”
In the euro zone, she said “we are not too worried about exchange rate effects,” adding that IMF analysis showed that a 50 basis point difference between the Fed and ECB rates “is likely to lead to a small change in exchange rates.” change, that is, 0.1% to 0.2%.
“That said, it’s not a big problem here (in Europe),” she said.
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