A statement from the International Monetary Fund (IMF) came that global central banks should make it clear to financial markets that interest rates should stay higher for a longer period in order to bring inflation back to the target in a sustainable manner and avoid a recovery in price pressures.
The IMF’s warning came amid a significant loosening in financial conditions since October.
“Central banks should convey that it is possible to feel the need to keep interest rates higher for a longer period until there is evidence that inflation is returning to purpose in a sustainable way. “When economic activity recovers, it may pose the risk of a sharp rise in inflation, leaving countries open to more shocks that will knock inflation expectations out of control,” he said.
