The International Monetary Fund (IMF) is confident that the growth of the Eurozone will recover gradually, but considers necessary “a greater tightening of monetary policy” to return inflation to the target (2%). His recommendation is to maintain a “strict” monetary policy, despite the complaints already expressed by countries such as Italy and Portugal.
This recommendation to continue giving priority to inflation was extended to the world economy as a whole. And beyond numbers, equations, calculations and prognoses, the economy is created in the image and likeness of humanity. You only have to think of one of those boxers who takes a beating, who stands up for some reason, who goes to the corner when the assault ends tired and bloodied, but who, when the bell rings, returns to the ring to continue receiving sticks without falling.
This is the image reminiscent of the description of the global economy made by Kristalina Georgieva, director of the International Monetary Fund (IMF), at a meeting of finance ministers and central bank governors of the so-called G-20.
“The world economy has shown a certain resilience”, he stressed. “Despite the successive shocks of recent years and the rapid rise in interest rates, global growth, although anemic by historical standards, remains firmly in positive territory, supported by a solid labor market and robust demand for services,” he stressed. That said, the boxer still lands more kicks and wobbles. “Activity is slowing down, especially in the manufacturing sector”, he warned. “Looking to the horizon, the medium-term outlook remains weak”, he warned.
He focused his attention, above all, on the area of ??rising consumer prices, in which he emphasized that there has been encouraging news and “the trend is finally down”. However, the punishment is not over. “General inflation continues to be too high and underlying inflation remains stagnant despite the significant tightening of monetary policy,” he said. “Although progress has been made, the work is not over. A premature celebration can destroy the successes obtained in the disinflation process”, he insisted.
To mitigate the risks, in the face of inflation that can be prolonged, he recommended continuing along the path of this tightening monetary policy, while the fiscal policy must begin a consolidation that allows economic shock absorbers to be rebuilt.
This call for perseverance from the Fund’s command comes after the Federal Reserve (Fed or central bank of the United States) agreed at its June meeting to establish a pause in interest rate hikes after ten consecutive increases, which left them at 5%-5.25%. This is the highest level in nearly two decades. Jerome Powell, its chairman, clarified that this was only a temporary decision and that there could be at least a couple of new hikes this year.
The first date to observe this new stage will come next week, when the Fed holds its July meeting. The following day, July 27, the ECB will meet, which now has rates at 4%. While US inflation has eased back to 3% in June (4.8% core), after peaking at 9.1% in 2022, Powell said, in line with Georgieva, that the job is not done and that the healthy target for the Reserve is 2%. Another thing is what some analysts think, who have long sensed a possible recession and not a “soft landing” as predicted
From progressive sectors of the United States it is reiterated that the monetary escalation causes harm to the weakest pockets. But the director of the IMF, who is committed to the hard line, considers that this task is necessary. If the intensity is lowered, he pointed out, inflation could be prolonged even further, which would require further tightening “with the risk that fragmentation would weigh even more on growth”.
