Global policymakers were urged by the steering committee of the International Monetary Fund to keep a close eye on pricing dynamics, but also to "look through" inflationary pressures that the organization still believes are only temporary in nature and will ebb away with the normalization of economies.
Governments should "carefully calibrate" their domestic policies to address an evolving pandemic, said the International Monetary and Financial Committee (IMFC), which comprises up of 24 finance ministers and central bank governors from IMF member countries.
"We will continue to prioritize health spending and protecting the most vulnerable, while shifting focus, as appropriate, from crisis response to promoting growth and preserving long-term fiscal sustainability," they said.
Concerns about inflation, caused by unleashing of pent-up demand, disruption in global supply chains, rising commodity, and energy costs, and extreme weather events, have of late dominated IMF and World Bank annual meetings this week and prompted the Fund to downgrade its outlook on global growth.
"Central banks are monitoring price dynamics closely and can look through inflation pressures that are transitory. They will act appropriately if risks of inflation expectations de-anchoring become concrete," the IMFC said, a reference to the banks using monetary policy tools to control inflation.
An earlier draft by the IMF had called on banks to be ready to take "decisive actions to maintain price stability," but that language has now been toned down.
As wealthy countries recover from the pandemic, the issue of inflation has been difficult for policymakers to contain, while developing economies struggle with Covid-19 variants, shortage of access to vaccines, and a shortage of resources. The IMF has warned that a sudden tightening of monetary policy in the United States or Europe could result in devastating fund outflows from developing countries.
"The key question is to know whether this is a transitory inflation or not. Nobody has a response to that key question," French Finance Minister Bruno Le Maire told reporters on Thursday, adding that he's been discussing it this week with U.S. Federal Reserve Chairman Jerome Powell, U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde.
More initiatives were required for easing of the global shortages of key goods, said Magdalena Andersson, the Swedish finance minister who chairs the IMFC panel.
"It's important that we get the global value chains working better than they are today," Andersson added.
If they want to limit negative cross-country spillovers, it was important for policymakers to communicate clearly while also using policymakers to communicate clearly, the IMFC also said.
Noting that the risks to the global economic recovery of the pandemic hit are skewed to the downside, the IMF statement noted that the reasons for this were increasing disparities in economic recovery and access to Covid-19 vaccine between rich and poor countries.
The efforts of the IMF to create a new Resilience and Sustainability Trust (RST) that would aid in channeling a $650 billion allocation of reserve assets to provide affordable long-term funding for poor and middle-income nations that are implementing structural changes in their economies and working to maintain balance-of-payments stability, were praised by the IMFC.
"The RST should preserve the reserve asset characteristics of the SDRs," the IMFC said. "We call upon the IMF to develop and implement the RST and collaborate closely with the World Bank in this process, and to provide technical support in exploring viable options for channeling SDRs through multilateral development banks."
(Source:www.moneycontrol.com)
Governments should "carefully calibrate" their domestic policies to address an evolving pandemic, said the International Monetary and Financial Committee (IMFC), which comprises up of 24 finance ministers and central bank governors from IMF member countries.
"We will continue to prioritize health spending and protecting the most vulnerable, while shifting focus, as appropriate, from crisis response to promoting growth and preserving long-term fiscal sustainability," they said.
Concerns about inflation, caused by unleashing of pent-up demand, disruption in global supply chains, rising commodity, and energy costs, and extreme weather events, have of late dominated IMF and World Bank annual meetings this week and prompted the Fund to downgrade its outlook on global growth.
"Central banks are monitoring price dynamics closely and can look through inflation pressures that are transitory. They will act appropriately if risks of inflation expectations de-anchoring become concrete," the IMFC said, a reference to the banks using monetary policy tools to control inflation.
An earlier draft by the IMF had called on banks to be ready to take "decisive actions to maintain price stability," but that language has now been toned down.
As wealthy countries recover from the pandemic, the issue of inflation has been difficult for policymakers to contain, while developing economies struggle with Covid-19 variants, shortage of access to vaccines, and a shortage of resources. The IMF has warned that a sudden tightening of monetary policy in the United States or Europe could result in devastating fund outflows from developing countries.
"The key question is to know whether this is a transitory inflation or not. Nobody has a response to that key question," French Finance Minister Bruno Le Maire told reporters on Thursday, adding that he's been discussing it this week with U.S. Federal Reserve Chairman Jerome Powell, U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde.
More initiatives were required for easing of the global shortages of key goods, said Magdalena Andersson, the Swedish finance minister who chairs the IMFC panel.
"It's important that we get the global value chains working better than they are today," Andersson added.
If they want to limit negative cross-country spillovers, it was important for policymakers to communicate clearly while also using policymakers to communicate clearly, the IMFC also said.
Noting that the risks to the global economic recovery of the pandemic hit are skewed to the downside, the IMF statement noted that the reasons for this were increasing disparities in economic recovery and access to Covid-19 vaccine between rich and poor countries.
The efforts of the IMF to create a new Resilience and Sustainability Trust (RST) that would aid in channeling a $650 billion allocation of reserve assets to provide affordable long-term funding for poor and middle-income nations that are implementing structural changes in their economies and working to maintain balance-of-payments stability, were praised by the IMFC.
"The RST should preserve the reserve asset characteristics of the SDRs," the IMFC said. "We call upon the IMF to develop and implement the RST and collaborate closely with the World Bank in this process, and to provide technical support in exploring viable options for channeling SDRs through multilateral development banks."
(Source:www.moneycontrol.com)
