Rédaction Africa Links 24 with AFP
Published on 2024-02-02 03:28:40
In a recent statement, Managing Director Kristalina Georgieva of the International Monetary Fund (IMF) expressed concern over the risks to the global economy if central banks begin to cut interest rates too soon. She emphasized that moving “slightly” too late would be a preferable approach. With the US Federal Reserve, the European Central Bank (ECB), and other central banks holding interest rates at elevated levels to combat a post-pandemic surge in prices, the focus has now shifted towards when these banks should begin cutting rates to stimulate investment and economic growth.
Georgieva emphasized that the risk of premature easing is greater than being slightly behind, based on the conclusions drawn from historical data. She advised central banks to act based on the available data and not to keep interest rates tight if it is unnecessary. Her statements come in the wake of the US Fed’s decision to maintain interest rates, with Chair Jerome Powell indicating that an interest rate cut in the next meeting seems unlikely.
ECB President Christine Lagarde also hinted at the inevitability of a rate cut but refrained from committing to a specific date. Georgieva acknowledged that the United States is nearing a “soft landing,” where policymakers bring inflation to target levels without triggering a recession. She stressed the importance of carefully assessing the Fed’s posture, indicating that the first rate cut might only be a matter of months away.
Regarding Egypt, the IMF has extended its current mission to provide more time to finalize an expansion of a $3 billion loan agreement due to the country’s economic struggles caused by various geopolitical and economic shocks. Georgieva highlighted the complexity of Egypt’s problems and expressed optimism about the significant progress being made in addressing them.
In the case of Argentina, Georgieva clarified that the IMF is not discussing a new program, as the country grapples with a severe economic crisis characterized by high poverty rates, minimal foreign exchange reserves, and hyperinflation. She praised the country’s president, Javier Milei, for his pragmatic approach and decisiveness in addressing the economic challenges, emphasizing the need for more ambition to tackle the problems.
Georgieva’s statements underscore the delicate balance that central banks and policy leaders need to maintain in navigating the current economic landscape. The IMF continues to closely monitor global economic developments and provides guidance to countries facing economic challenges, emphasizing the importance of data-driven decision-making and pragmatic approaches to addressing economic issues.
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