IMF warning: Major Asian central banks should not overly rely on the policy direction of the Federal Reserve
The IMF has issued a warning to central banks in Asia, advising them not to focus too much on the actions that the Federal Reserve may take when formulating their own monetary policies. The IMF's Asia-Pacific director pointed out that the US monetary policy has a strong and direct impact on the financial conditions and exchange rates in Asia. He warned that if central banks in various countries closely follow the Fed's policies, it may disrupt their own price stability. It is recommended that central banks formulate policies based on their own circumstances and avoid excessive reliance on expectations of future actions by the Federal Reserve
On April 18th, International Monetary Fund (IMF) Managing Director Georgieva pointed out that the world is focusing on the United States. The most pressing questions for everyone are: "What will happen to US inflation and interest rates? What policy will the Federal Reserve adopt? How will the US respond to the increasingly interventionist world of government policies?"
In response, Georgieva stated that the current approach of the Federal Reserve is correct, and we should not expect interest rates to drop rapidly. At the same time, the IMF optimistically believes that conditions for the Federal Reserve to start cutting interest rates will be met this year.
Georgieva also mentioned that the continued strength of the US dollar is a "concerning" issue for other currencies, and other countries are worried about how long the strong dollar trend will last.
Against the backdrop of a strong US dollar, a "currency defense war" is on the verge of breaking out in many countries. Japan and South Korea are facing significant devaluation pressures.
In response, IMF Asia-Pacific Director Krishna Srinivasan stated at a press conference on Thursday, "IMF analysis shows that US monetary policy has a strong and direct impact on the financial conditions and exchange rates in Asia."
He also pointed out that each Asian central bank should formulate policies based on their own inflation situation to avoid excessive reliance on expectations of future actions by the Federal Reserve.
He warned that if central banks in various countries closely follow the policies of the Federal Reserve, it may disrupt price stability in their own countries.
He suggested that a "more prolonged tightening" stance should be adopted in economies with high inflation, while policy settings should be more accommodative in economies with a large amount of idle capacity (i.e., output below potential levels)