IMF Managing Director: "US Inflation Raises Risks to Economic Recovery"

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated on the 7th (local time) that the continued rise of inflation in the United States is one of the risks facing the global economy, and early interest rate hikes are necessary to curb it.

According to The New York Times (NYT), Georgieva warned in a blog post that "there is a risk of a more persistent rise in inflation and inflation expectations, which may require the U.S. to tighten monetary policy earlier than expected."

Earlier, on the 1st, the IMF predicted in its annual consultation report with the U.S. that the U.S. economic growth rate this year would be 7%, the highest since 1984. The IMF pointed out that while many countries benefit from increased exports due to active trade driven by this rapid economic recovery, they also face another risk from the continued rise in inflation.

Georgieva wrote, "The persistent rise in inflation will further worsen the two-track recovery situation, where some regions like the U.S. are recovering quickly due to COVID-19 vaccine distribution, while others lag behind."

She noted that U.S. interest rate hikes could lead to sharp global financial tightening and severe capital outflows from emerging markets, posing a significant challenge especially for countries with high debt ratios.

Despite concerns about inflation risks, she emphasized the need for monetary stimulus to support economic recovery and stressed the importance of avoiding overreaction to temporary inflation increases.

She added, "Central banks of each country should communicate closely about future monetary policies to avoid market volatility."

Ahead of the upcoming G20 Finance Ministers and Central Bank Governors meeting in Italy starting on the 9th, she urged global leaders to take urgent measures to accelerate vaccination for high-risk groups.

The IMF announced last month that it plans to discuss increasing Special Drawing Rights (SDR) by $650 billion to help countries severely affected economically by COVID-19.

The board aims to complete all procedures by mid-next month, and if there are no objections or requests for additional meetings, the proposal will be considered approved and submitted to the full assembly agenda.

This content was produced with the assistance of AI translation services.