IMF Urges Central Banks to Maintain Course in Fighting Inflation Amid Concerns of Long-term Rise in Interest Rates

The International Monetary Fund (IMF) on Thursday urged the US Federal Reserve and other central banks worldwide to “maintain the course” of monetary policy and remain vigilant in combating inflation.

IMF spokeswoman Julie Kozack said the pace of inflation had slowed in the United States but remained an urgent concern.

Interest rates can rise for a long time

“If inflation turns out to be more persistent than expected, then the Fed may have to push interest rates higher for longer,” Kozak said, according to Reuters.

She stated that the IMF will publish an update of the World Economic Outlook on July 25.

The IMF warned in April that hidden vulnerabilities in the financial system could erupt into a new crisis and hit global growth this year, cutting its global growth forecasts for 2023. It forecast real GDP growth of 2 .8% in 2023 and 3.0% in 2024 – a tenth of a percentage point less than what it predicted in January for each year.

The world economy grew by 3.4% in 2022.

“We see medium-term challenges for the global economy, and this calls for policy action now. We believe central banks should maintain a monetary tightening course to decisively reduce inflation,” Kozack said.

His comments on the US economy followed an “Article IV” review of US policies, indicating continued concern about inflation risks and noting that the latest data validated his views on the resilience of the labor market.

“We also see that inflationary momentum has slowed, but that inflation remains a pressing concern. Our advice remains unchanged, which is that the Fed should maintain the course of monetary policy to ensure a sustained reduction in inflation and to ensure that inflationary expectations … remain well anchored,” the IMF spokesperson concluded.