IMF: Interest rates should stay high for longer

The IMF has said, ‘Central banks should stick to the approach of keeping interest rates higher for longer.’ The International Monetary Fund (IMF) has made a statement that global central banks should make it clear to financial markets that interest rates need to remain higher for longer in order to sustainably bring inflation back to target and avoid a rebound in price pressures. The IMF’s warning comes amid a significant easing in financial conditions since October. “Central banks should communicate that they are likely to need to keep interest rates high for longer until there is evidence that inflation has returned to target in a sustainable manner. Premature easing could bring the risk of a sharp resumption of inflation as economic activity recovers, leaving countries open to further shocks that could throw inflation expectations out of control,” the IMF’s Monetary and Capital Markets Department Director Tobias Adrian and two of his deputies wrote in a blog post.