Inflation could “become more persistent” in some parts of the world if supply chain disruptions continue or inflation expectations are lowered, the International Monetary Fund (IMF) said on Thursday.
In the United States, inflation is expected to decline in 2022, but policy makers must remain vigilant for upside risks, IMF spokesman Gerry Rice said at a regular briefing.
“The persistence of high levels of inflation in the United States could require an early monetary policy response, which would be a systemic disadvantage for both the United States and the world economy,” he said.
According to the most recent data, in October inflation in the United States stood at 6.4% after reaching 5.4% in September.
In the UK, the price hike reached 4.2% annually, its highest level since November 2011, driven by energy prices.
While in the euro zone, the data reported was 4.1% last month and could approach levels close to 4.5% by the end of the year, according to analysts.
Officials and global observers are divided on whether the Fed should raise interest rates soon to control inflation.
San Francisco Federal Reserve Chair Mary Daly this week asked for patience before raising rates, predicting the price hike will fade on its own as the Covid-19 pandemic recedes.
He argued that raising interest rates now would not fix supply chain bottlenecks and other temporary problems that are driving prices up. On the contrary, he said, it would slow down job creation and recovery.
“Over the next few quarters we will watch how the economy is doing and see if inflation goes down and workers go back (to their jobs),” he said.
“As we get a clearer signal, we will be ready to act accordingly, providing or withdrawing support as needed to ensure the economy settles in a sustainable place,” he added.
Daly’s remarks came after St. Louis Fed Chairman James Bullard urged a quicker end to asset purchases – a government program to prop up the economy in the aftermath of the Covid pandemic. -19) to put the central bank in a position to raise rates.
The US Federal Reserve should “take a more restrictive approach” in its next monetary policy meetings in order to anticipate if inflation does not dissipate as expected, he said in an interview with Bloomberg Television.
On the European side, the president of the European Central Bank, Christine Lagarde, has stood firm and insists that interest rates will not rise, as that could stifle the recovery of the euro zone.
Fed to raise rates in 2022: JP Morgan
The United States Federal Reserve (Fed) will begin raising interest rates from September 2022, economists at JP Morgan said in an investor outlook note.
The group of analysts, led by Michael Feroli, said that the central bank’s goal of full employment will be met by the middle of next year and they expect interest rates to increase by 0.25% in the third quarter of next year.
This first movement would be followed by increases of 25 basis points each quarter “at least until real rates are zero,” the team of experts explained.
The investment bank’s forecast for the Fed’s first rate hike is a bit more conservative than that of some other brokerages such as Deutsche Bank, which expects the first escalation to be in July 2022, that is, at the end of the second quarter.
JP Morgan economists expect US economic growth to be 3.5% next year, a more moderate pace compared to the 5.5% forecast for 2021.
Reference-www.eleconomista.com.mx