By Andrea Shalal

WASHINGTON (Reuters] – Friday’s warning from the International Monetary Fund referred to an increase in inflationary pressures especially in the United States and the uncertainty resulting from the Omicron version of COVID-19. The Fund also said that the U.S. central banks should concentrate more attention on the risks of inflation.

Gita, the chief economist of IMF’s Monetary and Capital Markets Division, wrote a blog on Friday. They warned that both the Omicron and pandemic resurgences would cause increased uncertainty about global economic prospects.

They said that the strength and magnitude of inflationary pressures underlying the recovery varied greatly across countries. Therefore, policy responses can be tailored to each country’s unique economic circumstances.

According to the United States, consumer prices reached a 31 year high in October. This meant that there is monetary policy justification to place more emphasis on inflation than any other advanced economies.

They wrote that the Federal Reserve should accelerate asset purchase tapering and set a path to policy rate rises. This is in line with comments by Fed Chair Jerome Powell this week.

They also wrote that other countries might need to raise their monetary policy sooner than anticipated if inflationary pressures become more widespread.

They urged policymakers to stay agile, focus on data, communicate effectively and avoid creating panic in the market that could lead to adverse consequences, particularly for developing and emerging economies.

The experts said that rising fuel and food costs have led to higher inflation in many nations, while global factors like the high price of commodity foods could increase this pressure through 2022.

The IMF stated that while inflation may remain high in many countries well into 2022, inflation measures for medium- and long-term inflation expectations remained within the policy target ranges of most economies.

The report stated that long-term inflation expectations in the United States had increased, although they were still close to historical averages. It also said that it appeared well-anchored. Euro area inflation expectations had increased, but were expected to become better anchored to the European Central Bank’s 2% objective.

Turkey is an exception, as the threat of inflation expectations being “unmoored” is evident in that the monetary policy was eased despite increasing inflation.

The report stated that core inflation had risen due to multiple causes, such as rising demand and disruptions in supply.

The IMF stated that it expects supply/demand imbalances to reduce over time. This will lower price pressures. Shipping delays, delivery lags and shortages of semiconductors are likely to increase in the second quarter 2022.

The IMF stated that supply disruptions were more severe than anticipated and that inflation is likely to continue for longer periods of time than originally thought.

It noted that a frontloaded Fed response to dampen inflation risks could result in market volatility and create problems elsewhere — especially in emerging and developing economies.

Authors wrote that in order to avoid this, it was important for policy changes to be well communicated. But emerging market and developing nations should prepare themselves for rising interest rates from advanced economies. They can also negotiate debt maturity extensions if necessary.