(MENAFN) Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), emphasized the importance of central banks globally relying on macroeconomic data to inform their monetary policy decisions. Georgieva underscored the necessity for central banks to use economic indicators and trends as guiding principles when determining their monetary policy trajectory.
Georgieva cautioned against the risk of "premature loosening" of interest rates by central banks amidst their current monetary tightening cycle, along with "a very tricky space of different countries being in different place in the cycle."
"So you cannot, as it was last year, where everybody needed to tighten and you kind of synchronize policy action. You cannot do that anymore. You cannot look at the other guy and say, oh, well, they are loosening, therefore I should be loosening, or they are staying put, therefore I should stay put. So that's a tricky part," she stated on Thursday at a media round table in Washington.
Georgieva also highlighted the risk associated with maintaining interest rates at higher levels for an extended period. She emphasized the importance of central banks closely monitoring macroeconomic data to mitigate this risk effectively.
"Our team has looked back in history, and the conclusion they drew is that the risk of premature easing is higher than the risk of being slightly behind, because a premature easing can reverse gains with more significant impact on confidence, both consumer confidence and investor confidence, and also anticipation for what inflation may look like in the future," she clarified.
Regarding attaining a “soft landing” – a scenario in which a central bank successfully reduces inflation while averting a recession, the IMF head declared: "They now need to lend the plane smoothly. They are going to lend it, lend it in the best possible way. Not too early, not too late, move into policy easing."
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