A more aggressive tightening of the Fed's monetary policy may cause a collapse of stock markets, capital outflow and a fall in the value of currencies of emerging economies, so these countries need to carefully prepare for a change in the parameters of the Fed's policy, the IMF said.
The IMF, which will present new forecasts for global economic growth on January 25, said that the US economy is likely to continue to show steady expansion, while consumer price growth is likely to slow down later in 2022.
The IMF said that the gradual tightening of the Fed's policy is likely to have a slight impact on emerging markets, but high inflation or continued supply disruptions may strengthen expectations of a faster Fed rate hike.
"Given the risks of a more aggressive Fed rate hike and a surge in coronavirus cases, emerging economies may face bouts of economic turbulence if they do not prepare for such a development," the IMF said.
Last week, St. Louis Fed President Bullard signaled that the Fed rate could rise as early as March, which is several months earlier than previously expected.
"The Fed's faster-than-expected rate hike may cause financial markets to fall and provoke a tightening of financial conditions. These events can also cause capital outflows and currency falls in emerging markets," the IMF said.
The IMF said emerging markets with high inflation or weaker institutions should act quickly to allow currencies to depreciate and raise benchmark interest rates.