The steering committee of the International Monetary Fund (IMF urged world authorities to closely monitor price dynamics, but to “look through” inflationary pressures that are transitory and will fade as economies normalize.
The International Monetary and Financial Committee (IMFC), made up of 24 finance ministers and central bank governors of IMF member countries, said in a final statement that governments should “carefully calibrate” domestic policies in the face of an evolving pandemic.
“We will continue to prioritize health spending and protect the most vulnerable, while shifting focus, as appropriate, from responding to the crisis to promoting growth and preserving long-term fiscal sustainability,” they said.
Concerns about inflation, stoked by stifled demand, supply chain bottlenecks, higher energy and commodity prices, and weather events have been a hot topic of debate at the IMF’s annual meetings. and the World Bank this week, helping the Fund trim its outlook for global growth on Tuesday.
“Central banks are closely monitoring price dynamics and can watch through inflationary pressures that are transitory. They will act appropriately if the risks of anchoring inflation expectations materialize, ”said the IMFC.
The language was toned down from a previous draft that asked central banks to be ready to take “decisive action to maintain price stability.”
Magdalena Andersson, Swedish Finance Minister who chairs the IMF panel, said that “it is important that we make global value chains work better than they are today,” adding that more initiatives were needed to alleviate the global shortage of some goods.
The IMFC also called for clear communications from the authorities to limit indirect negative effects between countries and to use macroprudential tools to limit financial vulnerabilities.
The statement noted the growing divergences between rich and poor countries in economic recovery and access to vaccines, noting that recovery risks are tilting downward.
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