If central banks move back on interest rates prematurely, ‘inflation may become problem for growth’ for longer period, Georgieva says
Evaluating central banks’ interest rate hikes, the managing director of the IMF said it is early to move back on rates, adding that they are expecting cuts before early 2025.
Kristalina Georgieva, responding to Anadolu’s question, said: “Central banks have acted decisively in a coordinated manner, we’re seeing headline inflation beating and going down.”
The core inflation, primarily because of the stubborn food prices, is still not truly down the way it should work, she added during the Qatar Economic Forum in the capital Doha.
Georgieva stressed: “Central Banks got to stay the course because if they move back on interest rates prematurely, then inflation may become a problem for growth for a longer period of time.”
The ongoing Russia-Ukraine war that began on Feb. 24, 2022, and the rough two years of the coronavirus pandemic caused significant problems in the world economy especially in terms of inflation, with central banks taking strong and rapid steps against inflation rates.
The Fed has been increasing its policy rate, from 0.25% in January 2022 to 5.25,gradually, while the European Central Bank’s policy rate increased to 3.25% from minus 0.5% in June 2022.
The Bank of England also increased its policy rate over 10 times.
Some economists and institutions warn central banks of causing a global recession by insisting on interest rate hikes.