IMF: Global Finance Officials Are Concerned about the Rising Inflation
With supply chain difficulties growing in the face of rising demand, political leaders have focused their attention on rising prices and whether they will persist or weaken in the coming months.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Sunday that "Global finance officials are worried about rising inflation pressures but there it is little fear that it will become a 'runaway train.'"
Georgieva said at the G30 central banking conference: "We are in a somewhat more uncertain space now."
However, in advanced economies "policymakers have the tools" to deal with inflation, so "there is no significant concern that this would be a runaway train."
Despite this, finance ministers and central bank governors gathered in Washington last week for the annual meetings of the IMF and the World Bank, expressing concern that " the prices increases could be more than transitory," stated Georgieva.
Big emerging nations like Russia and Mexico have already hiked interest rates, indicating that "in these places, their policymakers are sufficiently concerned already to take action."
US Fed is pulling back on stimulus policy
Officials at the US Federal Reserve have indicated that they will begin to pull back on stimulus by reducing asset purchases in the final weeks of the year, but the benchmark interest rate is projected to remain at zero until late 2022 at the earliest.
The Bank of England's stimulus has remained unaltered so far, but there were signals of disagreement at its most recent policy meeting, when two of its rate-setting panel voted to end the bond-buying stimulus as soon as possible to help contain inflation.
A very difficult balancing act lays ahead
Central bank governors confront a "very difficult balancing act," according to Andrew Bailey, governor of the Bank of England, because they can't solve fundamental supply shocks with monetary policy but must respond to what's happening to the economy.
He explained that failure to act to contain inflation threatens to undermine the credibility of central banks in inflation-fighting.
Bailey said: "We have ... to preserve the huge progress we've made in terms of the credibility of monetary policy regimes. I mean that is absolutely critically important."