IMF steering committee calls for inflation vigilance, draft statement shows

IMF steering committee calls for inflation vigilance, draft statement shows

The International Monetary Fund’s steering committee is urging global policymakers to increase their monitoring of inflation dynamics and be ready to take “decisive actions to maintain price stability,” a draft communique showed, Reuters reports.

The statement, to be issued by the Fund’s International Monetary and Financial Committee (IMFC) on Thursday, highlights significantly increased concerns at this week’s IMF and World Bank fall meetings that inflation spikes may prove more durable.

The 24-member IMFC said inflation was being aggravated by pent-up consumer demand, pandemic-induced supply chain disruptions and a sharp rise in energy and commodity prices.

“The current surge in inflation is still assessed to be mainly driven by those temporary factors but now appears less transitory than previously expected, and upside risks to the inflation outlook in the near term are increasing in a wide range of countries,” the committee said.

It added that some central banks have taken proactive measures to begin withdrawing monetary stimulus to avoid a potential de-anchoring of inflation expectations.

The IMFC called for central banks to remain vigilant for second-round effects of inflationary forces and to provide clear communications on shaping expectations.

“Special attention should also be given to the build-up of financial vulnerabilities stemming from house price increases, historically high asset prices, increased crypto asset-related activities, and the withdrawal of support measures,” the panel said, adding that macroprudential and regulatory tools should be used to mitigate risks going forward.

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