Central banks must “act decisively to bring inflation back to its target,” the International Monetary Fund (IMF) said on Tuesday in a report, which highlights an uncertain environment in terms of financial stability.
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In order to cope with inflation at its highest since the early 1980s and which is likely to “set in”, central banks must continue their rate hikes, according to the Global Financial Stability Report (GFSR), published on Tuesday. by the Fund.
The director general of the institution, Kristalina Georgieva, had already called on central banks on Thursday to “stay the course”, insisting on the risk that they “do not do enough” in the face of inflation which “remains stubborn. and persistent.
Driven by a particularly strong post-pandemic recovery and the destabilization of supply chains, inflation rose further under the effect of Russia’s invasion of Ukraine and its consequences on food prices and energy.
Clear communication on the objectives of the leaders will be essential to “maintain credibility and avoid unjustified market volatility”, estimates in its report the IMF, which is hosting its annual meetings in Washington this week, face-to-face for the first time since 2019.
However, the institution recognizes increasingly serious difficulties, both for advanced economies and for emerging countries.
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Financial markets are under stress, with investors becoming more risk averse in the face of economic and political uncertainties.
The monetary tightening has also led to a fall in the price of financial assets, which adds to the negative forecasts for the economy, all of which reinforces fears of a coming recession.
The fund is also concerned “about the hesitant real estate sectors in many countries which are causing concern that these difficulties may spread to the banking sectors and the economy in general”.
This is particularly the case of China, whose real estate sector is experiencing a sharp turnaround with a drop in sales of new homes during the pandemic, causing liquidity problems for many developers, already heavily indebted.
However, the failure of promoters could come to hit the banking sector hard, even the most modest establishments, highly exposed to this debt, estimates the IMF.
Finally, the institution highlighted the growing difficulties of access to financial markets for emerging or low-income countries, with an increase in the cost of loans, due to inflation and the rise in interest rates, which reinforces the dollar.