Seoul: The International Monetary Fund (IMF) said on Thursday the economies of India, China and Australia were recovering especially rapidly, suggesting it notices growing pressures for authorities there to tighten monetary policy ahead of others in the region.
“In a few special cases ... the recovery is advancing so rapidly that output gaps are already starting to close and pressures are already emerging,” the IMF said in a regional economic outlook report, released in Seoul.
It called the three economies special cases, while adding a tightening of monetary policy seemed unnecessary elsewhere in the region in the near future.
The comments add to growing expectations among global traders that some major emerging economies would start to raise interest rates and remove stimulus measures far ahead of advanced economies.
Australia’s central bank already raised its interest rate this month, becoming the first major economy to tighten monetary policy since the financial crisis started.
The Reserve Bank of India on Tuesday laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector, lifting its inflation forecast and warning of the threat of asset price bubbles.
The IMF upgraded economic growth forecasts for Singapore for 2009 and 2010 from its previous projections announced on 1 October, but did not elaborate.
The IMF said the recovery in the region was tentative and that the pick-up in economic activity had so far been supported by factors that were either temporary or could turn out to be so.
“The risks of inflation at present are low. In most countries, large output gaps are likely to persist for some time and are even expected to widen next year in many cases, as growth is projected to remain below potential,” it added.
It also advised Asian central banks not to raise interest rates only to calm asset price growth, saying lifting rates ahead of advanced economies could attract “carry trade-type” capital inflows and aggravate asset price pressures.
“For all these reasons, it would seem preferable, at least initially, to address incipient asset price pressures through targeted prudential measures rather than the blunt instrument of monetary policy,” it said.
The Washington-based organization did not specify economies facing particularly serious asset price pressures.