WASHINGTON — The biggest challenge central bankers face now is bringing inflation down, International Monetary Fund (IMF) managing director Kristalina Georgieva said Thursday as her deputy chief executive warned of the growing risk of economic fragmentation.
Georgieva said at a conference in Washington that policymakers should take targeted measures to ease rising food and fuel prices while avoiding moves that could fuel inflation or distract monetary policy.
First Deputy General Manager Gita Gopinath said at the same conference the stronger dollar, now at its highest in more than 20 years, and concerns about financial fragility also pose major challenges in the current environment and there is no room for missteps .
“It’s really a very narrow path to getting things right,” Ms. Gopinath said, noting that the dollar’s sharp rise has had important macroeconomic implications for a variety of countries around the world.
Ms Gopinath said policymakers must keep a close eye on potential vulnerabilities, noting a lack of data on risks to financial stability posed by hidden leverage at non-bank financial institutions.
Another major challenge, Ms Gopinath said, is the rising risk of geoeconomic fragmentation, noting that the 2019 coronavirus disease (COVID-19) pandemic and war in Ukraine have increased risks “significantly”.
“It doesn’t mean that trade as a whole could collapse, but we will certainly redraw the map – the global trade map – in terms of who is trading with whom,” she said, adding that there will be implications for productivity, efficiency and Occupation.
Ms. Gopinath noted that more than 30 countries have restricted trade in food, energy and other essential commodities since Russia’s February 24 invasion of Ukraine. – Reuters