Rate Hikes May Deepen Global Economic Divergence: IMF Chief

Interest rate hikes aimed at combating inflation could exacerbate the "dangerous" and "deepening" divergence in economic developments between advanced and developing economies, IMF Managing Director Kristalina Georgieva said on Wednesday.

Georgieva said inflation was not a universal phenomenon, but was a problem in a number of countries and especially the United States, where US consumer prices surged 7 per cent in the 12 months to December, the largest annual increase in nearly four decades.

Ms Georgieva told an event hosted by the Center for Global Development that the Federal Reserve and other central banks knew how to handle inflation, but it could be a delicate balancing act, and the "spillover impact on emerging markets .... can add fuel to the fire of divergence".