The expectation of a moderate recession combined with the expectations that the decrease in the pressure on energy prices will start the disinflation process caused a relaxation in financing conditions and a recovery in the stock markets. International Monetary Fund (IMF), central banks take action without delay to control and not succumb to market optimism. inflation.
Economists from the international organization Tobias Adrian, Christopher Erceg and Fabio Natalucci wrote in an article that although inflation has fallen and interest rates have fallen somewhat in some countries, “Both are still too high.”
“Although this it may be tempting to conclude that monetary policy has become too tight and if it is about to cause an unnecessary economic contraction, investors may be too optimistic about reducing inflation.
In this sense, they state the following. Hopes to fight inflation have been accompanied by rising expectations that central banks will not only stop tightening, but will also cut interest rates fairly quickly soon.
Thus, they argue that central banks should be determined in the fight against inflation and ensure that monetary policy remains sufficiently restrictive in order for inflation to return to the target permanently.
“Central banks Communicate the need to keep interest rates higher for longer until there is evidence that inflation, including wage and service prices, is sustainably returning to target.
They also warn that it could happen. faces pressure to ease monetary policy as the price rises. unemployment and inflation continues to fall.
Therefore, it is essential for the authorities to be determined and focus on bringing inflation to the target without delay.”
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