IMF chief sees risk of sustained rise in U.S. inflation
Interest rates, in turn, could lead to a sharp tightening of global financial conditions and significant capital outflows from emerging and developing economies, IMF Managing Director Kristalina Georgieva said in a blog published Wednesday with the IMF’s surveillance note for G20 countries. inflation risks comes amid sharp criticism by Republican lawmakers of President Joe Biden’s multi-trillion-dollar plans to boost spending on infrastructure, child care, community college tuition and expanded coverage of home care for the elderly and disabled.
Georgieva said an accelerated recovery from the COVID-19 pandemic in the United States, where growth is seen reaching 7% in 2021, would benefit many countries through increased trade, but rising inflation could be more sustained than expected. Market expectations suggested commodity prices would remain contained over the next few years, but inflation developments varied within advanced economies and were picking up more rapidly in Britain, the United States and the euro area, while remaining subdued in others, like Japan.
The IMF said the global economic outlook remained uncertain given questions about the evolution of the pandemic and progress on vaccinations, as well as the possibility that the pickup in inflation would prove «more persistent» than expected. monetary policy, which could hit emerging and developing economies particularly hard, widening the divergence in recovery prospects. Georgieva repeated her call for urgent action by the G20 countries to accelerate vaccinations to high-risk populations, warning of a «worsening two-track recovery» that is leaving a large number of countries behind while the United States, China, the euro area and a few others are recovering quickly.
Source: Andrea Shalal | Reuters