The International Monetary Fund (IMF) has said that emerging economies should prepare for US interest rate hikes. The Federal Reserve can discourage financial markets and trigger capital outflows and currency depreciation.

The IMF said that it expects continuous growth with inflation that can moderate later in the year. A gradual, well-telegraphed tightening of US monetary policy can impact appearing markets with foreign demand balancing the impact of growing financing costs. And inflation can boost costs more than expected and trigger faster rate hikes by the US central bank. “Emerging economies should prepare for potential outbreaks of economic turbulence,” the IMF said in a statement mentioning the risks caused by Fed rate hikes and the Covid-19 pandemic.