IMF Warns about Impacts of Fed's Tapering and Asset Purchases

Summary

The International Monetary Fund (IMF) warned developing countries over the possibility of an economic slowdown caused by the tapering policy issued by the US Federal Reserve (The Fed). In the latest report released January 10, the IMF said that the tapering could happen sooner than later as the inflation soared at its highest pace in nearly four decades. The labor market has also started to tighten due to rising wages.

“These changes have made the outlook for emerging markets more uncertain. These countries are also confronting elevated inflation and substantially higher public debt,” the IMF wrote. According to the IMF, the average gross government debt in emerging markets has increased by almost ten percentage points since 2019 to around 64 percent of gross domestic product (GDP) by the end of 2021.

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