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Global rate hikes haven’t had a negative impact yet, says IMF chief

The world economy is still in a tough spot, according to the head of the International Monetary Fund (IMF), despite cautious optimism among economists and business leaders that the slowdown in inflation means the worst of last year’s crisis may be over.

Kristalina Georgieva, managing director of the IMF, said on Friday (20) that conditions in the world economy are “less bad” than feared a few months ago, but more problems could be on the way.

Addressing a panel at the World Economic Forum in Davos, Switzerland, Georgieva said interest rate hikes by the world’s major economies “still don’t bite” and could increase unemployment – a situation that cash-strapped governments may find hard to answer properly.

“It is very different for a consumer to have [uma] cost of living crisis and a job, than having [uma] cost of living crisis and no jobs,” she said.

Last year, most of the world’s central banks, including the US Federal Reserve and the European Central Bank, began aggressively raising interest rates in a bid to rein in rampant inflation triggered, in most cases, by the Russian invasion of Ukraine. , which raised energy prices.

ECB President Christine Lagarde pledged during Friday’s discussion to “stay the course” by raising the cost of borrowing to bring inflation down to the central bank’s 2% target.

For its part, the Fed also remains focused on hitting the 2% target. Policy will have to remain restrictive for “some time,” Fed Vice Chairman Lael Brainard said on Thursday. “We are determined to stay the course.”

And it threatened to raise commodity prices, including oil and natural gas, as demand picks up later this year.

“The amount of LNG [gás natural liquefeito] what [a China] will buy from the rest of the world will be bigger than we’ve seen…” said Lagarde.

That could weigh on global growth, which the IMF forecast in October would fall to 2.7% this year from 3.2% in 2022.

Still, economists and business leaders have signaled in recent weeks that the world economy may be at a promising turning point.

Inflation in the US and Europe is easing, supply chain bottlenecks are easing and the risk of energy rationing in Europe this winter has been averted. The reopening of China helped boost markets in Asia.

Lagarde said economies are moving from “defense mode… to competition mode”.

“So something must be picking up,” she added.

Source: CNN Brasil

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