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IMF urges Asia to be mindful of spillover risks from tightening

IMF urges Asia to be mindful of spillover risks from tightening

Friday, May 20, 2022, 10:04 GMT+7
IMF urges Asia to be mindful of spillover risks from tightening
A woman walks past the International Monetary Fund (IMF) logo at its headquarters in Washington, U.S., May 10, 2018. Photo: Reuters

Asian economies must be mindful of spillover risks as a decade of unconventional easing policies by major central banks is withdrawn faster than expected, International Monetary Fund (IMF) Deputy Managing Director Kenji Okamura said.

This risk applied particularly to the most vulnerable economies, said Okamura, without naming them.

Asian economies faced a choice between supporting growth with more stimulus and withdrawing it to stabilise debt and inflation, he said.

While Bank of Japan policy runs counter to a global shift towards monetary tightening, central banks in the United States, Britain and Australia raised interest rates recently.

Okamura, a former Japanese vice finance minister for international affairs, also said the COVID-19 pandemic, the war in Ukraine and tighter global financial conditions would make this year "challenging" for Asia.

The war was affecting Asia through higher commodity prices and slower growth in Europe, he said.

Speaking at his first media event since becoming one of four deputy managing directors at the global lender last year, Okamura warned on the prospect of even more forceful tightening if inflation expectations kept on "drifting".

"There is a risk that drifting inflation expectations could require an even more forceful tightening," he said.

Okamura called for calibrated policies and clear communication.

Reuters

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