IMF: US Federal Reserve rate hike could undermine global economic growth

The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, said that the projected increase in the base rate of the US Federal Reserve System (FRS) could become a serious obstacle to the growth of the global economy. It is reported by CNBC.

According to her, countries with high levels of debt denominated in dollars could have the most serious consequences from the rate increase, as its maintenance will become more expensive.

“Act now. If you can extend the repayment terms, please do so. […] now is the time to turn to them (creditors. – Ed.),” said Georgieva, referring to countries with high levels of public debt. According to her, now two-thirds of the countries are either in a “debt crisis” or at risk of falling into one.

“In 2020, we had the same policies everywhere because we were fighting the same problem — a sluggish economy. In 2022, conditions in countries have changed a lot, so we can no longer pursue the same policy everywhere, it must be country-specific and makes our work in 2022 much more difficult, ”said the head of the IMF, specifying that the speech it’s about fighting high inflation and global debt levels.

Eurozone inflation reached a record 5% in December, the UK inflation rate hit a 30-year high in the same month, and the US consumer price index rose at its fastest pace since June 1982, at 7%.

At a meeting on December 15, the Fed announced its decision ahead of schedule – in March, not June – to complete the quantitative easing program (Quantitative Easing, QE, is carried out by the Fed through the redemption of bonds from the market to the balance sheet). As soon as this is done, the Fed will begin to raise the key rate, said Fed Chairman Jerome Powell.

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