Jamal Al-Farouq IMF Urges Central Banks to Persist with Tightening Policy in Response to Ongoing Inflation Worries
In a recent announcement, Julie Kozack, spokesperson for the International Monetary Fund (IMF), called upon the U.S. Federal Reserve and other global central banks to continue implementing a restrictive monetary policy commonly referred to as tightening. Kozack emphasized the potential need for the U.S. central bank to prolong higher federal funds rates beyond initial expectations.
IMF Advocates Sustained High Interest Rates to Address Lingering Inflation Risks
Expressing concern over enduring inflation, the IMF’s spokesperson, Julie Kozack, stressed the necessity for the Federal Reserve and numerous central banks worldwide to maintain their existing path of tightening monetary policy. With the Federal Reserve’s meeting scheduled for June 14, 2023, just days away, market observers and financial experts anticipate a pause in rate hikes during this session. CME’s Fedwatch tool indicates a likelihood of over 74% that the rates will remain unchanged. While Kozack acknowledged a degree of moderation in U.S. inflation, she cautioned that sustained elevated levels might necessitate the Federal Reserve to uphold high rates.
Kozack commented, “Should inflation persist longer than anticipated, the Federal Reserve might find it necessary to raise interest rates for an extended duration.” Currently, the benchmark bank rate stands at its highest point in 16 years, leading to a surge in lending rates across the nation. For instance, on June 8, 2023, the average 30-year mortgage carried an interest rate of 7.591%.
Kozack addressed reporters at the IMF press briefing, stating, “While we observe a deceleration in inflation momentum, it remains an urgent concern. Our advice remains unaltered, emphasizing the need for the Federal Reserve to maintain their monetary policy course in order to achieve a sustainable reduction in inflation and ensure well-anchored inflation expectations.”
The IMF plans to publish its World Economic Outlook in late July, following an earlier warning in early 2023 about challenges expected to arise for the global economy, particularly slowdowns projected in the United States, European Union, and China. Kozack reasserted on Thursday that the organization maintains its anticipation of forthcoming challenges.
“Looking ahead, we anticipate medium-term challenges for the global economy, necessitating immediate policy action,” insisted Kozack. “We believe central banks should persist with monetary tightening to effectively combat inflation.”
What are your perspectives on the IMF’s recommendation for central banks to uphold a tight monetary policy in light of ongoing concerns about inflation? Please share your thoughts and opinions on this topic in the comments section below.
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Frequently Asked Questions (FAQs) about tight monetary policy
Q: What is the International Monetary Fund (IMF) urging central banks to do?
A: The IMF is urging central banks to maintain a tight monetary policy to address persistent inflation concerns. They emphasize the need for sustained high interest rates as a means to combat inflation.
Q: Why does the IMF believe central banks should continue tightening monetary policy?
A: The IMF believes that maintaining a tight monetary policy is necessary to achieve a durable reduction in inflation and ensure well-anchored inflation expectations. They see it as a crucial step in addressing the ongoing challenges posed by inflation.
Q: How likely is it that the Federal Reserve will pause its rate hikes?
A: According to CME’s Fedwatch tool, there is a greater than 74% probability that the Federal Reserve will keep interest rates unchanged during their upcoming meeting. However, market observers and financial experts are closely watching for any potential changes in the Fed’s stance.
Q: How does inflation in the United States factor into the IMF’s recommendations?
A: While acknowledging some moderation in U.S. inflation, the IMF emphasizes that if inflation remains elevated, the Federal Reserve may need to maintain high interest rates. The goal is to effectively combat inflation and ensure a sustainable reduction in inflation levels.
Q: When will the IMF release its World Economic Outlook?
A: The IMF plans to release its World Economic Outlook at the end of July. This report will provide further insights and analysis on the global economic outlook and the anticipated challenges that lie ahead.
More about tight monetary policy
- International Monetary Fund (IMF) Official Website
- Federal Reserve Official Website
- CME Fedwatch Tool
- IMF World Economic Outlook Reports
