High inflation rate
IMF advises US Federal Reserve to tighten monetary policy
The International Monetary Fund recommends that the US Federal Reserve tighten its loose monetary policy. Photo: Jim Lo Scalzo / EPA / dpa
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The International Monetary Fund advises the US Federal Reserve to tighten its monetary policy in view of the high inflation rate. The Fed has announced that it will slow down its bond purchases.
In view of the economic recovery from the Corona crisis and the high inflation rate in the USA, the International Monetary Fund (IMF) recommends tightening the loose monetary policy.
It would be “appropriate” for the US Federal Reserve (Fed) to curb its bond purchases more quickly and to pave the way to raise the key interest rate earlier than previously planned, said chief economist Gita Gopinath and capital market expert Tobias Adrian in an IMF on Friday -Blog entry.
In view of the rapid economic growth and the increasingly tense situation on the labor market, the US Federal Reserve must give the risk of high inflation “greater weight” than many other industrialized countries, including the euro zone, they said.
Rise in inflation in different countries
In other countries such as Germany, core inflation – that is, inflation without considering energy and food prices – rose less sharply and was also influenced by one-off effects such as the withdrawal of the VAT cut, it said. Different ways of measuring inflation showed that the increase was highest in the USA compared to the other G7 industrialized countries.
The IMF experts expect lower price pressure overall in the coming year because economic activity should normalize again after the Corona crisis. However, they also warned that in view of high demand and problems in global supply chains, inflation will “likely be higher for a longer period of time than previously assumed”. For countries in which the economic recovery was further advanced, “it would therefore be appropriate to accelerate the normalization of monetary policy,” they wrote.
In the US, the Fed has already announced that it will curb its bond purchases. Federal Reserve Chairman Jerome Powell indicated this week that an accelerated throttling could be decided at the next meeting of the Central Bank Council in mid-December. With the program, the Fed is pumping additional money into the financial markets to keep lending rates low and stimulate the economy.