"Rising U.S. inflation raises global risks," wrote Shang-Jin Wei, a former chief economist at the Asian Development Bank and professor of finance and economics at Columbia University's Business School. The article points out that there are two groups of countries that could fall into a serious financial and economic crisis if US interest rates rise sharply. The full text is edited as follows:

The move comes as U.S. inflation continues to accelerate, with consumer prices rising 5 percent in May from a year earlier. It is not just the Fed that needs to be wary. Policymakers around the world, particularly in fragile economies, should also prepare for US interest rates to rise sooner and faster than most currently expect.

Over the past 12 months, the Fed has raised its inflation forecasts sharply. At its mid-June meeting, the Federal Open Market Committee, which sets interest rates, estimated that inflation for personal consumption expenditures would reach 3.4 percent through 2021. That is a full percentage point higher than the median forecast given in March, and more than double the full-year inflation forecast a year ago for 2021.

While Fed officials see much of the current rise in inflation as temporary, there are also structural factors, which are not entirely related to the outbreak.

First, US monetary policy has been expansionary since 2008. Although the Federal Reserve has increased the money supply further in response to the outbreak of the recession, US monetary policy was very loose long before the outbreak.

Second, former US President Donald Trump has slapped tariffs on Chinese imports to the US, which has led to higher prices for imported goods, particularly affecting low-income families in the US. Tariffs on China have also made goods from Vietnam to Mexico, among other countries, more expensive in the United States, as well as many American products. In addition, since many components imported from China are also affected by the tariffs, the prices of downstream products have risen.

Finally, Mr. Trump's 2017 tax cuts and several rounds of fiscal stimulus he and President Joe Biden enacted have boosted aggregate demand, putting even more upward pressure on prices. Many economists, including some who support Democrats, believe the size of Mr Biden's $1.9tn pandemic rescue plan is far greater than is necessary given the approximate size of the US output gap.

What would be the international impact of higher US inflation? We need to recognise that there is a risk that the Fed could tighten monetary policy more abruptly and sharply than its current 3.4 per cent inflation forecast implies.

History suggests that if US interest rates rise sharply, both groups of countries could fall into severe financial and economic crises. The first group of countries had previously borrowed from foreign banks or on international bond markets, using foreign currency debt to finance much of their investment or consumption.

The second group of countries are those with fixed exchange rates but overvalued currencies. They are vulnerable to currency runs and currency crises.

Therefore, if the Fed tightens monetary policy significantly, we can expect a series of debt and currency crises in Central and South America, Africa and Asia over the next two to five years.