The IMF asks central banks to act without delay to control inflation
expectations about what lower pressure on energy prices begin a disinflation process, together with a recession outlook fairly mild, have prompted a relaxation in financing during the rebound in the stock markets, according to the International Monetary Fund (IMF), which has urged central banks not to get carried away by optimistic market policies, since these they must act without delay to control inflation.
In an article, economists from the international institution Tobias Adrian, Christopher Erceg, Fabio Natalucci They warn that, although inflation has decreased and the underlying rate has fallen slightly in some countries, “both are still too high.” “Although this may make it tempting conclude that monetary policy is becoming too tight and is about to cause an unnecessary economic contraction, investors may be overly optimistic about progress on disinflation.”
Thus, they argue that central banks must show determination in its fight against inflation and ensure that monetary policy remains tight enough to bring inflation back on target on a lasting basis.
“Central banks should communicate the probable need to maintain interest rates higher for longer until there is evidence that inflation, including wage and service prices, has sustainably returned to target,” they recommend.
They also warn that likely to face pressure to ease monetary policy as unemployment rises and inflation continues to fall. “Therefore, it is essential that the authorities remain resolute and focus on bringing inflation back to target without delay,” they conclude.