International Monetary Fund Chief Christine Lagarde Defended Central Bank Rate Hikes

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New Delhi: Indian Monetary Fund (IMF) chief Christine Lagarde 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’s comments came as a global market sell-off rolled on following Trump’s comments, underscoring rising financial volatility that the IMF will address at its annual meetings this week in Bali.

Lagarde 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 records as proof of the success of his economic programme including his confrontational trade strategy, and has frequently criticised the Fed for gradually raising interest rates, which could press the brakes on equity markets.

The global financial elite are on the Indonesian holiday island for a week of discussions clouded by the economic outlook.

The IMF’s latest report on world financial stability, 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.

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