International Monetary Fund Managing Director Kristalina Georgieva expects global monetary policies to diverge after most major central bankers have spent the last year tightening credit conditions to slow price gains.
(Bloomberg) — International Monetary Fund Managing Director Kristalina Georgieva expects global monetary policies to diverge after most major central bankers have spent the last year tightening credit conditions to slow price gains.
“We’re going to see after a period of convergence in monetary policy action — tightening rates, fighting inflation — some divergence” as, for instance, the US economy grows faster than the European Union, Georgieva said in an interview with Bloomberg Television on Friday.
Georgieva’s comments come ahead of a speech by Federal Reserve Chair Jerome Powell in Wyoming later Friday, which will be intensely monitored for clues on the path of interest rates. Central bankers from around the world are meeting in Jackson Hole for an annual three-day gathering, including Christine Lagarde, president of the European Central Bank.
Read more: Fed’s Jackson Hole Conference Is Underway: Here’s What to Expect
“Central bankers will have to recognize that some specificity in how they approach the fight against inflation — and how they link this to their role in supporting growth and employment — how they approach that is going to be a matter of thorough assessment of national data.”
The IMF last month raised its outlook for the world economy this year, partly on expectations for a soft landing in the US, seeing global gross domestic product growing 3%. However, it warned of lingering downside risks from higher interest rates and Russia’s war in Ukraine.
Georgieva also highlighted the cost of economic fragmentation, which she wrote about earlier this week in an article in Foreign Affairs, describing it in the piece as “a process that begins with increasing barriers to trade and investment and, in its extreme form, ends with countries’ breaking into rival economic blocs.”
The fund has warned that increasing restrictions on the trade of goods and services could reduce global GDP by up to 7%, while foreign direct investment could be channeled into competing groups of countries, hurting output.
These warnings come amid worries about rising economic and political competition between the US and China. Earlier this week, the BRICS group of countries said it plans to more than double its membership, adding Saudi Arabia, United Arab Emirates and Egypt — among others — to the emerging-market bloc with heavyweights China, India and Russia.
Read more: BRICS Bloc Grows Heft With Saudi Arabia and Other Mideast Powers
–With assistance from Lisa Abramowicz, Jonathan Ferro and Tom Keene.
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