Shafak News / The Managing Director Of The International Monetary Fund, Kristalina Gurgieva, Confirmed On Sunday That Central Banks Are Facing A “Difficult Budget Process” As Interest Rates Begin To Cut Interest Rates Around The World In Light Of The Ecline Inflation.
Central banks on both sides of the Atlantic cut interest rates this year, as the US Federal Reserve cut its key lending rate by half a percentage point last Wednesday in a bid to boost demand, a few months after the European Central Bank began cutting the key interest rate.
“But while central banks are cutting interest, they should be careful,” Gorgieva added at an event with ECB head Christine Lagarde in Washington.
“Central banks have a difficult task of striking a balance, central banks must ensure that inflation returns sustainably to its target and stay there, and maintain it, while avoiding the risk of excessively tightening monetary policies,” Gorgieva said.
She explained: While economic activity was weaker than we clearly wanted, but it was remarkably flexible, and while inflation was falling and interest rates fell, it seemed unlikely to fall into a recession.
The European Central Bank has cut interest rates by a quarter of a percentage point twice already this year, while the Bank of England voted Thursday to leave interest rates unchanged after just one cut, as inflation in the UK remained above the target.
“Decisive political measures have succeeded in maintaining inflation expectations,” ECB President Christine Lagarde said two days ago, adding that inflation is still on track to reach its 2 percent target in the middle of next year.
She said: “But is the mystery over? No, there’s still a lot of that around us.”
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