April Fool ’s Inflation Medicine Threatens Progress

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Aug 9 2022 (IPS) The world economy is on the brink of outright recession, according to the International Monetary Fund (IMF). The Ukraine war and sanctions have scuttled recovery from the COVID-19 pandemic. Over 80 central banks have already raised interest rates so far this year. Except for the Bank of Japan governor, major central bankers have reacted to recent inflation by raising interest rates. Hence, stagflation is increasingly likely as rising interest rates slow the economy, but do not quell supply-side cost-push inflation. Anis ChowdhuryIMF U-turn unexplained The IMF chief economist recently advised, “Inflation at current levels represents a clear risk for current and future macroeconomic stability and bringing it back to central bank targets should be the top priority for policymakers”. While acknowledging the short-term costs of raising interest rates, he has never bothered to explain why inflation targets should be considered sacrosanct regardless of circumstances. Simply asserting inflation will be more costly if not checked now makes for poor evidence-based policy making. After all, only a month earlier, on 7 June, the IMF advised, “Countries should allow international prices to pass through to domestic prices while protecting households that are most in need”. The Fund recognized the major sources of current inflation are supply disruptions – first due to pandemic lockdowns disrupti...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Armed Conflicts COVID-19 Economy & Trade Financial Crisis Global Headlines Health Labour TerraViva United Nations IPS UN Bureau Source Type: news