IMF Managing Director Cautiously Warns Against Premature Easing: "Powell, Maintain Tightening Path"

"Maintain the tightening path." Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), emphasized on the 8th (local time) that central banks, including the Federal Reserve (Fed), should not hastily ease their interest rate hike policies. This is because it could potentially trigger a resurgence of inflation.

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In an interview with CNN aired that day, Managing Director Georgieva stated, "The US and European economies are showing remarkable resilience." She added, "All of this positively affects our growth outlook," and "There is no global recession in our cards this year."

Additionally, Managing Director Georgieva stressed that major central banks must maintain their interest rate hike stance to prevent inflation from surging again. She advised Fed Chair Jerome Powell to "maintain the current (tightening) path."

The Fed, through the tightening cycle that began in March last year, has raised US interest rates to 4.5?4.75%, the highest since 2007, and has signaled further hikes ahead. Chair Powell appeared before Congress for two consecutive days, stating, "The terminal rate level may be higher than previously projected," suggesting that the pace of rate hikes, which had been lowered to the usual 0.25 percentage points, could be increased again.

Along with this, Managing Director Georgieva said, due to the Ukraine war, Russia’s economic outlook for this year is "very bleak," meaning "a medium-term forecast of at least a 7% contraction in the Russian economy."

Earlier this year, the IMF projected Russia’s economic growth rate at 0.3% for this year and 2.1% for next year. This was not only higher than that of the UK and Germany but also much more optimistic than forecasts from other organizations such as the World Bank (WB). The WB and the Organisation for Economic Co-operation and Development (OECD) forecast Russia’s economic growth rates at -3.3% and -5.6%, respectively, for this year. CNN cited experts saying, "The IMF is repeating Russian President Vladimir Putin’s forecasts and neglecting economic work," pointing out that even the Russian central bank has indicated that the country’s GDP could shrink by 1% this year.

Managing Director Georgieva diagnosed that as workers leave Russia, access to technology is blocked, and energy sanctions cause damage, the Russian economy will face increasing difficulties over time. She said, "What we reflect on is that Russia has made some oil sales beyond the European Union," but added, "However, this will not have a lasting impact on the Russian economy." She continued, "We do not see Russia benefiting in any way from what it has done in Ukraine or from its actions."

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