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IMF urges Fed to speed up policy tightening amid rising inflation risk

Jerome Powell, Federal Reserve Chair, testifies at a hearing of the U.S. House Oversight and Reform Select Subcommittee on coronavirus crises, held on Capitol Hill, Washington, June 22, 2021.

Reuters| Pool | Reuters

The U.S. Federal ReserveThe International Monetary Fund stated Friday that the International Monetary Fund recommended tightening monetary policy faster to address rising inflation risk.

The Fed decided in early November to start tapering — which refers to a reduction in the amount of bonds it purchases — “later this month” at a pace of $15 billion every month. However, the new identification CovidThe IMF recommended that the pace of inflation should accelerate if variants and inflation are running higher than target.

“We see grounds for monetary policy in the United States — with gross domestic product close to pre-pandemic trends, tight labor markets, and now broad-based inflationary pressures — to place greater weight on inflation risks as compared to some other advanced economies including the euro area,” the IMF said in a blog post.

“It would make sense for the Federal Reserve (Federal Reserve) to speed up the withdrawal of assets and move forward with the path for policy rates increases.”

Fed Chairman spoke earlier in the week. Jerome PowellThe central bank indicated this. could step up its taperingThese efforts would be likely to be addressed at the next meeting.

Data released in November showed that the U.S. consumer price index rose 6.2% in October from a year ago — hitting its highest level in 30 years.

But, Fed officials have stated that when it comes time to raise interest rates, market participants should not take tapering as a signal of an impending rate rise.

The IMF asks central banks to clearly communicate their plans, and not only the Federal Reserve.

The IMF stated that “major central banks must communicate carefully their policies so as to not trigger panic in the market which would have adverse effects not only at home, but abroad.”

But not all people believe central banks must speed up their tightening.

Anne Richards was Tuesday’s CEO at Fidelity International. urged policymakers to hold off on acting hastily.

I strongly agree with the view that it is better to wait for a month, or even two months before taking any action. “I believe that this is a less evil than acting early to tighten,” she stated.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.