UK Inflation Rate 5.5% Early Next Year... IMF Urges "Immediate Interest Rate Hike"

Hungary, Chile, and Pakistan Simultaneously Raise Benchmark Interest Rates

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The International Monetary Fund (IMF) has warned of the risk of soaring inflation and urged the United Kingdom to raise its benchmark interest rate. The global inflation risk is growing as Hungary, Chile, and Pakistan simultaneously raise their benchmark interest rates.

According to major foreign media, on the 14th (local time), the IMF held a virtual meeting attended by IMF Managing Director Kristalina Georgieva, UK Chancellor of the Exchequer Rishi Sunak, and Bank of England (BOE) Governor Andrew Bailey.

The IMF warned that demand in the UK is too strong and that the inflation rate could rise to 5.5% by early next year. The IMF acknowledged that the spread of the Omicron variant increases economic uncertainty in the UK and could slow growth in the short term. However, it emphasized that inflation is the biggest concern and that the BOE must take immediate action. The IMF added that the BOE should keep in mind that even if it raises the benchmark interest rate now, the rate is still low enough to maintain an accommodative stance. Managing Director Georgieva advised, "The BOE should end its accommodative measures." The BOE is scheduled to hold its final monetary policy meeting of the year on the 16th.

The UK's consumer price inflation rate reached 4.2% in October, entering the 4% range for the first time since 2011. The IMF expects the UK's inflation rate to reach the BOE's monetary policy target of 2% only by early 2024. Managing Director Georgieva diagnosed, "It is still too early to determine whether it is due to Brexit or COVID-19, but the UK is facing a severe labor shortage," adding, "Because of this, it is difficult for the UK economy to grow without inflation."

Inflation in emerging and less developed countries is already severe. The Central Bank of Chile sharply raised its benchmark interest rate from 2.75% to 4% on the same day, as the November consumer price inflation rate soared to 6.7%, the highest in 13 years. The Central Bank of Hungary also raised its inflation forecast for next year from 3.4-3.8% to 4.7-5.1% and increased the benchmark interest rate from 2.1% to 2.4%. The Hungarian Central Bank announced plans to continue its tightening policy long-term through next year. The State Bank of Pakistan also raised its benchmark interest rate from 8.75% to 9.75%.

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