This proposal appears in the organization's report on financial stability issued as part of the spring meetings of the International Monetary Fund and the World Bank, which are being held this week in Washington.
The International Monetary Fund today recommended that central banks avoid premature monetary easing and respond appropriately to overly optimistic market expectations regarding interest rate cuts.
This proposal appears in the organization's report on financial stability issued as part of the spring meetings of the International Monetary Fund and the World Bank, which are being held this week in Washington.
According to the International Monetary Fund, if central banks move too early to cut interest rates, they could contribute to easing financial conditions and impede the final stage of the inflation deceleration process.
“In cases where progress in the fight against inflation is sufficient to indicate that inflation is evolving sustainably towards the target, central banks should gradually move to a more neutral policy stance,” he says.
At the same time, he warns that quantitative tightening and reduction of central banks' balance sheets should be done “carefully”, carefully monitoring market performance issues, and acting in the face of potential tensions.
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