IMF chief cautions on inflation, foresees continued easing in 2024

International Monetary Fund (IMF) Managing Director Kristalina Georgieva stressed on Thursday that while inflation is moderating faster than expected, it has not yet been completely ericated. Speaking at an event hosted by Atlantic Council think tank, Georgieva urged central bankers to meticulously gauge ir decisions regarding interest rate cuts based on incoming data.

Georgieva noted that heline inflation for vanced economies declined to 2.3 per cent in final quarter of 2023 from 9.5 per cent 18 months earlier, with expectations for downward trend to persist throughout 2024. She highlighted that this trajectory could pave way for central banks in major vanced economies to initiate rate cuts in latter half of year, although timing and pace may vary.

Highlighting importance of central bank independence, Georgieva cautioned against premature rate cuts that could potentially le to unexpected inflationary pressures, necessitating furr monetary tightening. Conversely, delaying rate cuts for too long could dampen economic activity.

Georgieva previewed upcoming World Economic Outlook, indicating a marginal strengning of global growth, driven by robust activity in United States and many emerging market economies. However, she emphasized ongoing concerns, citing geopolitical tensions and need to anticipate unforeseen challenges.

Despite resilience of global economy supported by strong labour markets and easing supply chain disruptions, Georgieva reflected on need for vigilance. She highlighted substantial global output loss since onset of COVID-19 pandemic, particularly impacting vulnerable countries.

Georgieva remarked on varying pace of economic recovery across regions, with United States experiencing a robust rebound, while euro area's recovery is more grual due to lingering effects of high energy prices. Among emerging market economies, countries like Indonesia and India are faring relatively better, but low-income countries continue to face significant challenges.

Looking forward, Georgieva stressed on importance of foundational reforms to restore price stability, enhance fiscal resilience, and stimulate growth. She vocated for policies aimed at strengning governance, reducing bureaucratic barriers, boosting female labour force participation, and improving access to capital, which could significantly uplift output.

(With Reuters inputs)