Emerging market central bankers have urged the US Federal Reserve to raise rates sooner rather later in order to end the uncertainty over Fed policy that has pummeled stock markets and currencies in recent weeks.
“We think US monetary policymakers have got confused about what to do. The uncertainty has created the turmoil,” said Mirza Adityaswara, senior deputy governor at Indonesia’s central bank.
“The situation will recover the sooner the Fed makes a decision and then gives expectation to the market that they [will] increase [rates] one or two times and then stop.”
His comments contrast with warnings from the World Bank that a decision by the Fed to raise rates for the first time since 2006 at its policy meeting next week could destabilise emerging markets (EMs).
The bank’s chief economist Kaushik Basu warned that the Fed should keep rates on hold next week to avoid “panic and turmoil” in EMs.
Anxiety over Fed policy has combined with an economic slowdown in China and falling commodity prices to rock EMs in recent months, causing sharp falls in their stock markets and increased capital outflows.
Julio Velarde, Peru’s central bank governor, said most EMs wanted the Fed to raise rates “as soon as possible”.
“The uncertainty about when the Fed hike will happen is causing more damage than the Fed hike will itself,” he said during a visit to Seoul.
The comments echo those made by Agustín Carstens, Mexico’s top central banker, who told Reuters at a meeting of monetary officials in Jackson Hole last month that a Fed rate rise indicating a stronger US economy would be “for us, very good news”.
At the same conference, Raghuram Rajan, governor of India’s central bank, told the Wall Street Journal: “It’s preferable to have a move early on and an advertised, slow move up rather than the Fed be forced to tighten more significantly down the line.”
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