By Leika Kihara
TOKYO (Reuters) – Expected interest rate hikes by the U.S. central bank could delay the economic recovery of emerging Asian countries and keep pressure on policymakers to hedge against the risk of capital outflows, he said. a senior official at the International Monetary Fund (IMF) on Tuesday.
Rising inflationary pressure, China’s economic slowdown and the spread of Omicron variant coronavirus cases also cloud the outlook for the region, said Changyong Rhee, director of the IMF’s Asia-Pacific Department.
“We don’t expect a US monetary normalization to cause major shocks or major capital outflows in Asia, but emerging Asia’s recovery could be slowed by higher global interest rates and leverages,” he told Reuters in a written interview.
As worries about a more aggressive Fed roil global markets, investors expect the US central bank to signal its plan to raise interest rates in March on Wednesday. Markets have priced in a total of four rate hikes this year.
Rhee said there was a risk that US inflation could be higher than expected and demand a “faster or greater” monetary tightening by the Fed.
In the updated version of the World Economic Outlook released on Tuesday, the IMF cut its growth forecast for emerging Asia for 2022 to 5.9%, down from 6.3% in its October forecast.
The downgrade was largely due to a sharp 0.8 percentage point cut in China’s 2022 growth estimate to 4.8%, which reflected the impact of real estate woes and consumer developments stemming from strict restrictions on Covid-19.
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