IMF urges Central Banks to keep inflation in check

The International Monetary Fund (IMF) cautioned central banks against leaving inflation to "spiral out of control" amidst uncertainty surrounding the Middle East war. Kristalina Georgieva, the IMF Managing Director, gave the caution in a curtain-raiser speech ahead of the Fund's joint Spring Meetings with the World Bank Group, slated for next week in Washington. She noted that the Middle East war had delivered a large, global and asymmetric supply shock that threatened to derail a world economy that was otherwise on course for an upward growth revision.

Ms. Georgieva said the transport disruptions caused by the conflict had pushed at least 45 million additional people into food insecurity, taking the total number of people facing hunger globally to over 360 million. The world could experience further shocks through three main channels - price, impact and supply shortages - igniting a costly inflation process and financial conditions. For central banks, Ms. Georgieva's guidance was for them not to "unnecessarily" tighten monetary policy, but remain committed to price stability, urging them to stand ready to move firmly when rate hikes in inflation expectations showed signs of becoming unstable. She added that the Spring Meetings would focus on how best to weather the shock and ease the pain on economies and people.

The IMF expects demand for balance-of-payments support arising from the war's spillovers to rise to somewhere between US$20 billion and US$50 billion, with the lower end of that range prevailing if the ceasefire was reached. The Spring Meetings would focus on helping countries find a path forward through what she called the "fog of uncertainty," and appealed for lasting peace in the Middle East and across the world.