Gita Gopinath, the first deputy managing director of the IMF, warns that central banks should be cautious about cutting interest rates due to the potential flare-up of inflation caused by market expectations of looser monetary policy. Inflation is expected to decline less sharply this year due to tight labour markets and high services inflation in various regions.
A top IMF official has warned central banks need to move cautiously on cutting interest rates this year, as market expectations of looser monetary policy could fuel another flare-up of inflation. Gita Gopinath, the first deputy managing director of the IMF , said inflation is set to decline less sharply than it did last year because of tight labour markets and high services inflation in the US, euro area and elsewhere.
This points to a “bumpy” path towards lower inflation, she said, suggesting official rates should not be lowered until the second half of the year. “The job is not done,” Ms Gopinath said in Davos, Switzerland. “ must move cautiously. Once you cut rates, it solidifies expectations of further rate cuts and you could end up with much larger loosening – which can be counterproductiv
IMF Official Central Banks Caution Interest Rates Inflation Monetary Policy Labour Markets Services Inflation
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