IMF chief defends rate hikes after Trump slams 'crazy' Fed
Central bank rate hikes were a "necessary development", International Monetary Fund (IMF) Chief Christine Lagarde said today, a day after Donald Trump sent global markets tumbling by calling Fed increases "crazy". "It's clearly a necessary development for those economies that are showing much-improved growth, inflation that's picking up... unemployment that's extremely low," Lagarde told a press briefing at the IMF's annual meeting in Bali.
"It's inevitable that central banks make those decisions," Lagarde said. Trump's comments yesterday triggered a sell-off on Wall Street, with Asian markets opening sharply lower today in response. "I think the Fed is making a mistake. It's so tight. I think the Fed has gone crazy," he said. But Lagarde added uncoordinated developed-country rate hikes were contributing to destabilizing capital outflows from emerging markets.
The financial outlook, combined with global uncertainty over trade tensions between US-China, has created little "unprecedented situation" for the world economy, said Lagarde. "Clearly as a result of (rate-hikes)...we see and we'll continue to see capital flow movements," she added. "The fact that large central banks of advanced economies aren't all moving at the same pace is also probably accelerating that phenomenon," she said.
