IMF: Fed rate hike will impact emerging economies

The International Monetary Fund (IMF) warned that possible increases in the benchmark interest rate of the Federal Reserve (Fed) from the US would impact emerging economies. It should be noted that since the beginning of the pandemic it has remained in the range of 0% – 0.25%.

According to the international body, the advance of the Fed to raise its rates earlier than expected could shake the financial markets and trigger the outflow of capital, as well as a depreciation of its currencies (thus a rise in the exchange rate).

“Accelerated Fed rate hikes could shake financial markets and tighten financial conditions globally. These events could occur alongside a slowdown in demand and trade for EE. UU. and they can lead to capital outflows and currency depreciation in emerging markets ”, indicated experts from the multilateral.

According to the latest Goldman Sachs projection, the Fed would raise interest rates four times this year. “We continue to see increases in March, June and September, and now we have added a rise in December,” they noted.

What is the impact in Peru?

Former SBS chief Juan José Marthans emphasized that the statement from the IMF This warning stands out mainly to countries with high levels of public and private debt, a situation in which Peru is not.

“In the Peruvian case, thanks to the foundation achieved in 30 years, This administration has inherited one of the economies with the lowest indebtedness in the public and private sectors. The impact will undoubtedly occur in all emerging countries, but it must be measured and treated differently; in Peru it will be less. While it could affect debt service, it is still very small. There will not be a strong impact on the fiscal accounts at first ”, explained the Director of Economics of the PAD of the University of Piura.

Regarding the “capital outflow”, Enrique Diaz, president of the consulting firm MCIF, explained that by raising the US benchmark rate, investors are looking for higher returns. “And if comparatively emerging markets (such as Peru) do not move their rates, the US will seem much more attractive, which in addition to other reasons is a more liquid and safer market,” he said.

He added that this mechanism is not to be alarmed, since whenever the Fed varies its rates it pushes the other markets to do so.

Along these lines, the specialists agreed that, despite the fact that the current reference rate of the Central Reserve Bank of Peru (BCRP) is 3%, there is still room to continue rising, as long as inflation is not controlled.

“It will depend on the management of the BCRP. There is room to raise rates, and if that is the case, the possibility of an outflow of capital from Peru is not going to be substantial. Therefore, exchange rate volatility could not be impaired, “said Marthans and concluded that the sun is appreciating due to the inflow of resources due to the metal export boom, and that will also dampen the exchange behavior in the face of any possibility of depreciation in the market. monetary system.

Dollar closes at S / 3,934 and BVL falls 0.01%

The dollar closed last Monday at S / 3.9340, an increase of 0.05% compared to the previous session, according to the Central Reserve Bank of Peru (BCRP). Meanwhile, the purchase in the parallel market was located at S / 3,943 and the sale at S / 3.97. While the main banks buy S / 3,912 and sell S / 3,962.

For its part, the Lima Stock Exchange (BVL) closed the session with the S&P Peru General at -0.01%; while the S&P Peru Select at -0.11%. It shows its first drop of the year, after a week of gains.