IMF: Calls on Fed to raise interest rates

The International Monetary Fund issued a warning on Friday about rising inflationary pressures, especially in the US, and the uncertainty caused by a new variant of the coronavirus called Omicron, noting that US banks need to focus more on the risks of inflation.

According to Reuters, in a related blog published today, Gita Gopinath and Tobias Adrian of the IMF warned that the “resurgence” of the pandemic and the Omicron variant have sharply increased the uncertainty about the global economic outlook. However, both stressed that the strength of the recovery and the magnitude of inflationary pressures vary widely between countries.

In the US, where consumer prices hit a 31-year high in October, they said, there is ground for monetary policy to place more emphasis on inflation risks than on other advanced economies, including the eurozone.

“The approach would be appropriate for the Federal Reserve (Fed) to accelerate the decline in asset markets and move towards higher interest rates,” the Fed chairman said in a statement issued this week. Jerome Powell.

Over time, they said, other countries may need to tighten their monetary policy sooner than expected.

They also noted that rising energy and food prices have fueled higher inflation in many countries and international factors such as high food prices will continue to exert pressure in 2022.

While inflation is likely to remain high until 2022 in several countries, medium- and long-term inflation expectations have remained close to policy targets in most economies, the IMF said.

The IMF expects supply and demand imbalances to ease over time, easing some price pressures, with delays in shipments and deliveries and semiconductor shortages likely to improve in the second half of 2022.

However, supply disruptions and increased demand have lasted longer than expected and inflation is now likely to be higher for longer than expected, the IMF said.