In front of one inflation "persistent", the central banks should not "back" although it entails risks for the financial sector, said Thursday the Director of the International Monetary Fund (IMF), Kristalina Georgievain an interview with AFP.
"We do not foresee, at this time, that central banks will stop fighting inflation"because "it is still there and as long as it does not fall significantly (…) they must continue" raising rates, he said.
"They have to stay the course in a much more difficult and complex environment"he claimed.
The measures of the central banks have left in sight "financial sector vulnerabilities"either in Switzerland or in the United States, acknowledged the head of the IMF, but that means that "must do more to ensure financial stability" and at the same time reduce inflation.
The rise in rates, which oscillate between 4.75% and 5% at the US Federal Reserve (Fed), led to the bankruptcy of several regional banks in the United States.
If the "risks become significant, then central banks would have to decide to what extent the fight against inflation takes precedence over financial stability"stressed Georgieva, but for the moment "we haven’t got there".
On the other hand, the world economy must face the fragmentation riskestimated the managing director, in particular due to trade tensions between the United States and China.
"We are coming out of a period where investment allocation was determined by cost, but this is no longer the case. In the United States, and elsewhere, homeland security and supply security have become essential" in making decisionsrecognizes Georgieva, who believes that this trend will continue.
"The question is how far should they go"he analyzed, adding that it was possible to protect both aspects "without completely undermining the foundations for growth".
According to the IMF, the trade war cost 0.4% of global growth last year, "or 400,000 million dollars less".
low growth
But, Georgieva stresses, "the resolution of debt issue forces countries to work together. The same goes for climate change: we won’t succeed if we don’t work together".
The role of the IMF is "provide a table around which all countries can sit and talk, even on contentious issues but to the benefit of all".
For the foreseeable future, the shocks caused by repeated crises will probably lead the world into one of the lowest growth periods in recent decadesbelow 3% in 2023.
The bottom will post on tuesday a update of its forecasts for 2023 and medium term.
"We expect growth of around 3% over the next five years, our weakest medium-term outlook since 1990"said the head of the institution in a speech.
Georgieva also expressed concern about the state of public finances in most countries, at a time when public debt soared almost everywhere in the world due to the effects of the pandemic and the Russian invasion of Ukraine.
There is challenges ahead, how to favor the ecological transition of emerging countries, which will require "our richest members help"especially since low-income countries have difficulties accessing the debt market, he said.
These nations often traverse financial difficultieswhich has led the IMF to significantly increase the funds at its disposal to $300 billion in recent months.
This could go on because "almost 15% of low-income countries already have debt difficulties and 45% are close" to have them, insisted Georgieva