IMF chief urges central banks to raise interest rates amid inflation concerns
1 min read . Updated: 07 Apr 2023, 11:42 AM IST
Premium- Many central banks have been increasing their benchmark lending rates since last year, in response to inflation that reached historically high levels in many countries, including the United States.
The head of the International Monetary Fund (IMF) Kristalina Georgieva has urged central banks worldwide to continue raising interest rates to combat inflation, even as concerns about financial stability persist.
Many central banks have been increasing their benchmark lending rates since last year, in response to inflation that reached historically high levels in many countries, including the United States.
However, this fight against inflation has been made more complex by the recent failure of Silicon Valley Bank, which took on too much interest-rate risk, causing turbulence in the banking sector on both sides of the Atlantic.
"We don't envisage, at this point, central banks stepping back from fighting inflation," IMF managing director Kristalina Georgieva said in an interview with AFP.
"They have to stay the course in a much more difficult, more complex environment," she said.
The long-term financial health of Swiss banking giant Credit Suisse has raised concerns among regulators, resulting in a push for the bank to merge with regional rival UBS. Georgieva said, "Central banks still have to prioritize fighting inflation and then supporting, through different instruments, financial stability."
During the same speech, the IMF chief cautioned that a slowdown in nearly all of the world's advanced economies is likely to cause global growth to fall below 3% this year and further noted that this represents the lowest medium-term forecast since the 1990s.
Furthermore, low-income countries are expected to face a double shock as a result of high borrowing costs and a decline in demand for their exports.