IMF chief wants central banks to keep raising rates to hit ‘neutral’ level
2022.10.26 07:01
IMF chief wants central banks to keep raising rates to hit ‘neutral’ level
Budrigannews.com – International Monetary Fund chief Kristalina Georgieva said on Wednesday that central banks should keep raising interest rates further to fight inflation until they hit a “neutral” level, though in most cases they have not reached this point.
Speaking to Reuters in Berlin a day before the European Central Bank is widely expected to raise rates by 75 basis points, the fund’s managing director said it would take until 2024 for the positive effect of central banks raising rates globally to be felt.
The ECB had for months said that its first step will be to raise rates to a neutral setting, where it was neither driving nor restricting growth, but some policymakers are now advocating more aggressive action, saying the ECB should go further to tame inflationary pressures.
“At this point we look for getting to a neutral mode, and in most places we are not quite yet there,” Georgieva said in an interview.
Central banks have to bring rates up because “when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest.”
Recent rate hikes by the ECB have come against the backdrop of a deteriorating economic outlook and inflation that hit 9.9% in the euro zone in September, driven by soaring food and energy prices after Russia’s invasion of Ukraine.
Asked how long she expected central banks to keep raising rates, Georgieva said the IMF projected that “by 2024 to get to a point when central banks are seeing the impact of their actions”.
“The benefits would come but they are not instantaneous, this requires some patience in society,” she added.
