IMF chief economist Gita Gopinath has warned central banks that they should be prepared to act quickly if inflation becomes a more serious problem.
Presenting today’s World Economic Outlook, Gopinath says central banks need to tread a fine line — addressing inflation and financial risks while supporting the recovery.
While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery.
Gopinath also said the Fund takes data integrity ‘incredibly seriously’ and has ‘robust systems’ in place, when asked about allegations that IMF MD Kristalina Georgieva pressured World Bank staff to manipulate data to benefit China during her time as World Bank chief.
[The IMF board backed Georgieva overnight — saying the evidence presented “did not conclusively demonstrate” that she played an “improper” role in China’s ranking in a flagship report while at the World Bank.]
Gopinath insists that the global growth picture doesn’t look remotely close to stagflation at the moment, with global growth still seen at 5.9% this year and 4.9% next year, and eurozone growth at 5% in 2021 and 4.3% in 2022.
But there are risks of supply side shocks, with rising commodity prices and shortages, meaning firms are creating less and lifting their own prices
On the move towards home working, Gopinath says that employment growth has been weaker than output growth in the recovery, and weaker than normal.
Working from home can provide flexibility to those who aren’t ready to return to customer-facing roles in the pandemic, help workers be productive as they don’t have to commute, and give more flexibility to women, she says.
However, we are not seeing that flexibility translating into more women returning to labour force.
And on the latest US debt ceiling crisis, Gopinath says the brinkmanship is unproductive, and creates uncertainty [the House of Representatives will vote on a short extension to the ceiling today].
It would be good if the debt limit were reformed, perhaps replaced with a medium-term borrowing target, or automatically lifted in line with Congress’s tax and spending decisions. she suggests.
Read More: IMF cuts global growth forecast as supply disruptions hit recovery – business live |