IMF chief Lagarde defends bank rate hikes
President Trump slams ‘crazy’ US Federal Reserve amid market turmoil
International Monetary Fund (IMF) chief Christine Lagarde on Thursday defended central bank rate hikes in a veiled rebuke to Donald Trump after the US president blamed “crazy” Fed policies for contributing to financial market turmoil.
Lagarde spoke as a global market selloff rolled into Asia following Trump’s comments, underscoring the rising financial volatility that the IMF will address at its annual meetings with the World Bank this week in Bali.
Lagarde, 62, said central bank rate increases such as those by the policy-setting US Federal Reserve were justified by fundamentals.
“It is clearly a necessary development for those economies that are showing much improved growth, inflation that is picking up... unemployment that is extremely low,” she told a press briefing in Bali.
“It’s inevitable that central banks make the decisions that they make.”
Following a sharp Wall Street sell-off on Wednesday, Trump said the Federal Reserve “is making a mistake.”
“I think the Fed has gone crazy,” he said.
Trump has repeatedly touted Wall Street record highs as proof of the suc- cess of his policies and confrontational trade strategy, and frequently criticizes the Fed for gradually raising interest rates, which could squeeze the brakes on equity markets.
The world’s financial elite are on the Indonesian holiday island for a week of talks clouded by the economic outlook.
An IMF report released Wednesday said global growth could be at risk if emerging markets deteriorate further or trade tensions escalate.
Much of the global angst has been dominated by Trump’s escalating tariff war with China and his disdain for world trading norms.
But higher US interest rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.
Lagarde said in Bali that world leaders should fix global trading systems instead of tearing them down, in response to rising nationalist impulses.
While defending rate hikes, Lagarde added Thursday that uncoordinated increases in advanced economies were contributing to destabilizing capital outflows from emerging markets.