IMF panel urges central banks to closely monitor inflation and “act appropriately”

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The logo of the International Monetary Fund can be seen inside the headquarters at the conclusion of the annual meetings of the IMF and the World Bank in Washington, USA on October 9, 2016. REUTERS / Yuri Gripas

WASHINGTON, Oct. 14 (Reuters) – The International Monetary Fund steering committee on Thursday urged global policymakers to closely monitor price dynamics, but to “examine” inflationary pressures which are transient and will subside as prices rise. economies will normalize.

The International Monetary and Financial Committee (IMFC), made up of 24 finance ministers and central bank governors of IMF member countries, said in a statement final press release that governments should “carefully calibrate” national policies for an evolving pandemic.

“We will continue to prioritize health spending and protect the most vulnerable, while shifting the focus, where appropriate, from crisis response to promoting growth and maintaining fiscal sustainability to long term, ”they said.

Inflation issues, fueled by pent-up demand, supply chain bottlenecks, rising energy and commodity prices, and weather events were a hot topic of debate at the meetings. IMF and World Bank annuals this week, and helped the Fund reduce its global growth outlook on Tuesday. .

“Central banks closely monitor price dynamics and can examine transient inflationary pressures. They will act appropriately if the risks of unanchoring inflation expectations materialize,” the IMFC said, referring to banks using monetary policy tools to control inflation. .

The language has been toned down from an earlier draft that called on central banks to be ready to take “decisive action to maintain price stability.”

TRANSITIONAL OR SUSTAINABLE?

Policymakers grapple with the issue of inflation as rich countries move past pandemic to recover, while developing economies grapple with variants of COVID-19, poor access to vaccines, and lack of resources . A sharp tightening of monetary policy in the United States or Europe could cause devastating outflows from developing countries, the IMF has warned.

“The key question is whether this is transitory inflation or not. No one has an answer to this key question,” French Finance Minister Bruno Le Maire said on Thursday, adding that he was discussing it this week with the chairman of the US Federal Reserve. Jerome Powell, US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde.

Magdalena Andersson, the Swedish finance minister who chairs the IMFC panel, told a press conference that more initiatives are needed to alleviate global shortages of key goods, adding: “It is important that global value chains are working better than they are today.

The IMFC also called for clear communications from policy makers to limit negative spillovers between countries and to use macroprudential tools to limit financial vulnerabilities.

The statement noted the growing divergences between rich and poor countries on economic recovery and access to vaccines, noting that the risks of recovery are on the downside.

LOAN OF RESERVES

The IMFC said it welcomes the IMF’s efforts to establish a new Resilience and Sustainability Trust (RST) to help channel an allocation of $ 650 billion in reserve assets to provide affordable long-term financing for poor and middle-income countries that undertake structural reforms and strive to maintain balance of payments stability.

“The RST should preserve the reserve asset characteristics of the SDRs,” the IMFC said. “We call on the IMF to develop and implement the RST and to work closely with the World Bank in this process, and to provide technical support in exploring viable options for channeling SDRs through banks. multilateral development.

G20 finance ministers backed plans for the new trust on Wednesday. Read more

Reporting by David Lawder, Jan Strupczewski and Andrea Shalal; Editing by Franklin Paul, Paul Simao and Andrea Ricci

Our standards: Thomson Reuters Trust Principles.


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