The Washington based International Monetary Fund (IMF) on Thursday said that the three economies of India, China and Australia were recovering at a especially rapid pace, which suggests that there would be growing pressures for regulatory authorities in these markets to tighten monetary policy well 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 International Monetary Fund said in a regional economic outlook report, released in Seoul.
The IMF while calling the three economies special cases, added that a tightening of the monetary policy for other countries in the region seemed unnecessary in the near future.
IMF also advised the central banks in the region against raising interest rates for now.
It also advised Asian central banks not to raise interest rates as it could potentially attract “carry trade-type” capital inflows and aggravate asset price pressures while staying away from pointing out economies facing such pressure.
“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 Australian central bank has already raised the interest rates, becoming the first major economy to do so after the crisis started while the Reserve Bank of India (RBI) is also contemplating measures like tightening credit to commercial property sector.