“IMF Urges Central Banks to Continue Raising Interest Rates to Curb Inflation”

The International Monetary Fund called on European central banks not to “stop” raising interest rates in order to stamp out inflation, according to a reportBy Alfred Kammer, IMF Europe Director, during a press briefing on the European economy in Stockholm.

We must kill this (inflationary) beast. If we start to stop raising interest rates and celebrate early, history is full of examples showing that we will need a second attempt to rein in inflation while wreaking havoc on the economy again,” Kammer said.

In order to control the global wave of inflation, central banks in the United States and Europe, in particular, raised interest rates dramatically since last year, which caused a slowdown in the global economy and raised concerns about the banking sector.

Although inflation is slowing on both sides of the Atlantic, the International Monetary Fund called for continued efforts to contain rising prices.

For the ECB, which has already raised interest rates to their highest levels since October 2008, in a range of 3% to 3.75%, that should translate into “more” interest rate hikes “for a longer period,” he said. Camer said.

The German economist added that the ECB’s monetary tightening policy should continue “until mid-2024 in order to return inflation to its target (2%) in 2025.”

For the International Monetary Fund, the need to slow inflation takes precedence over concerns surrounding the banking and financial system, which the body believes can contain the pressure.

“There is no question about that,” Kammer said, adding, “We think the banking system will be able to handle the stress.” He explained that despite the concerns raised by the collapse of the US SVB (Silicon Valley Bank) and the Swiss Credit Suisse, “we have in Europe a sound banking system with very solid and regulated capital.”

In addition to the efforts of central banks, the fund also calls on European countries to reduce their budget deficits and the size of support packages to counter inflation. When asked about the risks to growth, Kammer said that the unemployment rate remained low in Europe and that the European economy was “working at full potential”.

(AFP)