Lowering key rates too quickly when inflation has not returned to the expected level would represent a “higher risk” for the economy than waiting too long to act, the head of the IMF, Kristalina Georgieva, told the press on Thursday. .
“Our team looked into history and its conclusion is that premature easing represents a higher risk (for the economy, Editor’s note) than if it occurs a little too late,” declared the general director of the Monetary Fund. International (IMF), as pressure mounts on central banks to start lowering their rates.
Speaking more specifically about the case of the United States, Ms. Georgieva stressed that “the moment is indeed very important. If you look at the position of the Fed, they recognize that the work is not yet finished but that the We’re getting closer.”
But, she said, “don’t keep them high if you don’t have to,” while stressing that “we’re on our way to a soft landing” of the economy “but it’s not done. We are still 15 meters above the ground and we must continue until we have completely landed.”
On Wednesday the Federal Reserve (Fed) in fact left its interest rates unchanged and seemed to close the door to a possible reduction at its next meeting, scheduled for mid-March, as the markets were hoping for.
“Almost all” the members of the Fed’s monetary committee are in favor of “cutting rates this year but it is “unlikely that the Committee will reach, by the March meeting, a level of confidence” sufficient for now and already considering it, declared its president, Jerome Powell, during a press conference.
The Managing Director of the IMF also took advantage of her discussions with the press to take stock of two of the Fund’s main issues, Egypt and Argentina.
For the Middle Eastern country, the security situation in the region and the attacks by the Houthi Yemeni militia against maritime traffic in the Red Sea are having an impact on an already suffering economy.
Egypt “remains a real priority” while the country “must manage complex problems”.
“We are currently discussing to increase our (aid) program taking into account the developments of the last month,” explained Ms. Georgieva, “they are considering systemic adjustments of their policy and we are working on these details.”
Concerning the country of the South American continent, the head of the IMF confirmed that “at this point, we are not discussing a new program”, welcoming the work of “a good economic team in place, with a president ( Javier Milei, Editor’s note) very pragmatic, who is looking for how his country can get out of these difficulties.”
On Thursday, the IMF confirmed the payment of a new tranche of aid of $4.7 billion to Argentina as part of the program currently underway.