The head of the International Monetary Fund, Kristalina Georgieva, said that the Federal Reserve and other major central banks face great risks if they decide to ease monetary policy too early.
During the briefing, the head of the mentioned organization noted that the Fed should not doubt about lowering interest rates at a time when conditions for such a move will be formed in the external environment. Kristalina Georgieva also stated that financial regulators, when making decisions related to measures that make up the content of monetary policy, should pay attention to data, and not focus on excessive market expectations.
This week, Fed Chairman Jerome Powell signaled that the central bank of the United States has completed an aggressive policy-tightening campaign. At the same time, this hint should not be interpreted as a sign of a reduction in interest rates already in March. Fed officials this week also voted to keep the base rate at the level in the range of 5.25%-5.5%. This indicator is a 22-year high.
After the Fed’s statements and decisions, on the market estimate of the probability of an interest rate cut in March fell below 50%. Economists at Goldman Sachs Group Inc., Barclays Plc, and Bank of America Corp. have changed out forecasts about the prospects for monetary policy easing in the United States. In their opinion, interest rates will not be lowered before June.
Kristalina Georgieva said that the IMF sees higher risks from premature monetary easing, rather than from a belated decision of an appropriate nature.
As we have reported earlier, IMF Lifts World Economic Outlook.