International Monetary Fund First Deputy Managing Director Gita Gopinath. File | photo credit: Reuters
Price pressures appear entrenched in many economies, including emerging markets, and upside inflation risks are significant, said Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), adding that central banks must maintain their tight monetary policies.
Ms. Gopinath was addressing the Annual Conference of the Central Bank of Brazil in Brasilia on May 17.
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“Markets are probably overly optimistic about what it will take to bring inflation down in emerging markets. inflation are important,” she told the conference.
Therefore, Ms Gopinath said central banks must remain committed to maintaining tight policies and recognize that insufficient monetary tightening may require even more painful actions in the future – a lesson from the high inflation period of the years. 1970 which applies very much today.
“Fiscal discipline can help support central banks’ fight against inflation. And financial tools – used wisely – can improve trade-offs in times of pronounced financial stress.”
Ms Gopinath insisted that the challenges are global, but are more acute for emerging markets. Therefore, it is essential that authorities in emerging markets refine and strengthen their monetary, fiscal and financial policy frameworks.
However, there is a silver lining for emerging markets as they have so far shown resilience in the face of their own policy tightening and tightening in advanced economies, where rates have risen at the fastest pace in several years. decades.
The current U.S. central bank policy rate, which now sits in a target range of 5.0 to 5.25, is the highest in several years, and notably, it was close to zero at the start of 2022. interest rates generally helps to cool demand in the economy and thus helps in inflation management.
Growth in emerging markets remained strong throughout last year and should hold up reasonably well this year, while capital outflows have been limited, Ms Gopinath added.
