Connect with us

Hi, what are you looking for?

News

IMF’s Georgieva says central bankers must be ‘stubborn’ in fighting inflation

WASHINGTON — Central bankers must be persistent in fighting broad-based inflation, International Monetary Fund (IMF) chief Kristalina Georgieva said on Wednesday, conceding that many economists were wrong when they predicted last year that inflation would ease.

“Inflation is stubborn, it is more broad-based than we thought it would be,” she said. “And what it means is … we need central bankers to be as stubborn in fighting it as inflation has demonstrably been.”

If fiscal policy and monetary policy worked well, next year might prove less painful, she said at an event with French European Central Bank policy maker Francois Villeroy de Galhau. But if fiscal policy was not targeted sufficiently, it could become the “enemy of monetary policy, fueling inflation,” she said.

Ms. Georgieva’s comments came a day after the US reported an unexpected rise in August consumer prices, with rent and food costs continuing to climb.

US Treasury Secretary Janet Yellen, in an interview with CBS News, said she believed inflation “will come down over time” due to the actions of the Federal Reserve. Ms. Yellen said the Biden administration is trying to complement the Fed’s moves.

Ms. Georgieva said the surprising rise in inflation was “just one snippet of the uncertainty and difficulties” the global economy faced. Both the coronavirus disease 2019 (COVID-19) pandemic and Russia’s invasion of Ukraine contributed to surging prices and a cost-of-living crisis.

In a blog, the IMF warned that higher oil prices were driving up all consumer prices, which could result in a wage-price spiral if these second-order effects were sustained. Central bankers should respond “firmly,” it said.

When overall inflation is already high, as it is now, wages tend to increase by more in response to an oil-price shock, the IMF said, citing a study of 39 European countries. That showed people were more likely to react to price increases when high inflation was visibly eroding living standards, it said, noting that the larger the second-round effects, the greater the risk of a sustained wage-price spiral.

“If large and sustained, oil price shocks could fuel persistent rises in inflation and inflation expectations, which should be countered by a monetary policy response,” the IMF said, noting that people tended to seek higher compensation for oil price rises.

However, even in a high-inflation environment, wages stabilized after a year rather than continuing to rise at a steady clip, it said.

“To the extent that central banks remain adequately vigilant, current high inflation could still cause higher compensation for the cost of living than usual but need not morph into a sustained increase in inflation,” the IMF said. — Reuters

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

PHILIPPINE STAR/ MICHAEL VARCAS WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global...

News

Buildings are seen along EDSA in Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded...

News

Heavy traffic is seen on the southbound lane of EDSA in Cubao, Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN THE PHILIPPINE auto industry’s...

News

REUTERS THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected...

News

Vendors arrange their goods at a public market in Manila. — PHILIPPINE STAR/ RUSSEL A. PALMA THE ASIAN Development Bank (ADB) is planning to...

Editor’s Pick

With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.