The US currency’s surge is making other nations’ fight against soaring inflation even harder, the global financial body suggests.
As countries around the world struggle to bring down soaring inflation, the weakening of their currencies relative to the US dollar has made that fight even harder, the International Monetary Fund (IMF) has said.
In a report published on Friday, the IMF elaborated how countries should respond to a strong dollar. It highlighted that the greenback is at its highest level since 2000, having appreciated 22% against the Japanese yen, 13% against the euro and 6% against emerging market currencies since the start of this year.
“Such a sharp strengthening of the dollar in a matter of months has sizable macroeconomic implications for almost all countries, given the dominance of the dollar in international trade and finance,” the lender wrote.
It further indicated that while the US share in world merchandise exports has declined from 12% to 8% since 2000, the dollar’s share in world exports has held at around 40%. “On average, the estimated pass-through of a 10 percent dollar appreciation into inflation is 1 percent. Such pressures are especially acute in emerging markets, reflecting their higher import dependency and greater share of dollar-invoiced imports compared with advanced economies.”
According to the report, approximately half of all cross-border loans and international debt securities are denominated in US dollars. While emerging market governments have made progress in issuing debt in their own currency, their private corporate sectors have high levels of dollar-denominated debt.
“As world interest rates rise, financial conditions have tightened considerably for many countries. A stronger dollar only compounds these pressures, especially for some emerging market and many low-income countries that are already at a high risk of debt distress,” the IMF said.
The report suggested that the appropriate policy response is to allow the exchange rate to adjust, while using monetary policy to keep inflation close to its target. “The higher price of imported goods will help bring about the necessary adjustment to the fundamental shocks as it reduces imports, which in turn helps with reducing the buildup of external debt. Fiscal policy should be used to support the most vulnerable without jeopardizing inflation goals,” it said.
Fed interest rate hike creates this illusion. Many countries are dumping the US bonda and start keeping minimum USD in order to support their own currencies. When the next wave of interest hike occurs in all other countries, USD cannot be sustained unless they pay further higher interest rates. Inflation is on the loose, and even IMF says it will take another decade to control inflation and interest rate hikes. Grand Robber “printed” 60 billion NZD and it is going to bite soom with interest rate hikes. It cannot be avoided for long.
David ‘*Suddenly Seymour” stated last week on camera that they printing of millions (or-perhaps BILLIONS???) of NZ Dollars to stim the economy, but this is no better than Labour’s problem solving skills. “‘*Suddenly Seymour” would begin this ASAP. (*Little Shop of Horrors), stating that it would give people more money.
Obviously, those Zio-Constituents in Epsom will benefit via deflective investing into hidden assets and trust funds that no one else has access to.
Just wait ’till the derivatives and dividend pay-outs come due!
In the meantime, the masses call out; “Feeeed mea Seymour…Just Feeeeed mea..!” just like the deranged flesh-eating plant in the movie itself…!