Inflation in the United States has not “turned the corner yet” and it is too early for the Federal Reserve to declare victory in the fight on rising prices, a top IMF official said in an interview with the Financial Times yesterday.
Gita Gopinath, a deputy managing director of the Fund, urged the U.S. central bank to press ahead with rate rises this year.
She said it was important for the Fed to “maintain restrictive monetary policy” until a “very definite, durable decline in inflation” was evident in wages and industries not related to food or energy.
“If you see the indicators in the labour market and if you look at very sticky components of inflation like services inflation, I think it’s clear that we haven’t turned the corner yet on inflation,” she told the newspaper.
The comments follow Wednesday data showing that job openings, closely watched as a proxy for labour market shortages and pressure on employers to hand out wage increases higher than normal, fell only moderately in November in the United States.
Minutes of the Fed’s Dec. 13-14 policy meeting, published on Wednesday, showed that officials agreed that the central bank now needed to balance its fight against price pressures with the risks of slowing the economy too much.
In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the Ukraine war as well as inflation pressures and high interest rates engineered by central banks to rein in those price pressures.
In the interview Gopinath added that she expected China’s economy to suffer significantly in the near term. A rebound is possible later this year, however, as Chinese demand recovers, the report quoted her as saying.
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