IMF perceives a greater risk to the global economy

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NEW YORK, Feb 3, (Agencies): International Monetary Fund (IMF) Director Kristalina Georgieva raised concerns on Thursday, emphasizing that the IMF perceives a greater risk to the global economy if central banks initiate early interest rate cuts rather than moving “a little” later.

Amid efforts by central banks, including the US Federal Reserve and the European Central Bank, to address the aftermath of the Covid epidemic and bring inflation back to the desired level, interest rates have been maintained at higher levels in recent months. Now, as inflation shows signs of decline in various advanced and emerging economies worldwide, the focus has shifted to when central banks should consider cutting interest rates to stimulate investment and economic growth.

During a press conference in Washington, Georgieva shared the IMF’s analysis, stating, “Our team took a look at history, and the conclusion it reached is that the risk of early easing (of interest rates) is higher compared to being a little behind.”

These remarks from the IMF Director come on the heels of the US Federal Reserve’s decision to keep interest rates unchanged, with Chairman Jerome Powell dismissing the possibility of a rate cut at the upcoming March meeting. Powell’s statement led to a decline in stocks on Wall Street.

Addressing reporters, Powell said, “I do not think it is likely that the committee will reach a level of confidence by the March meeting to set March as the date for the reduction.”

Earlier in the week, European Central Bank President Christine Lagarde hinted at impending interest rate cuts but refrained from committing to a specific date.

Georgieva indicated that the United States is approaching what is termed a “soft landing,” where policymakers successfully bring inflation back to the target without triggering a recession. She remarked, “We are preparing for a soft landing. The matter is not over yet,” adding, “We are still 50 feet above the ground, and we know that the matter is not over as long as we do not land.”

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