IMF warning to central banks: 'Even if the clouds are clearing...'

International Monetary Fund (IMF) Managing Director Kristalina Georgieva made assessments regarding the global economy at a press conference. Georgieva stated that the risk of easing monetary policy too early is higher than the risk of "falling slightly behind."

Georgieva noted that inflation is seen to be falling faster than anticipated and stated that the world economy is more resilient than feared compared to a year ago.

Pointing out that there are still many risks to be mindful of, even if "the clouds are clearing," Georgieva noted that geopolitical risks persist.

KEEPING INTEREST RATES HIGH CAN POSE A RISK

Stating that keeping interest rates high for longer than necessary is a risk, Georgieva said, "This is not just a risk for the US economy, but also a risk for the global economy."

Georgieva explained that many developing economies that have brought inflation down to target are moving toward lower interest rates, and that interest rates in the US remaining high for longer could pressure and negatively affect exchange rates in these countries.

Georgieva said, "Therefore, the timing of the US easing its monetary policy is really very important; not too early, but also not too late."

FED INTEREST RATE CUTS

Stating that if the Fed's stance is evaluated carefully, it can be seen that the job is not yet finished but that the end is approaching, Georgieva noted that it is a "matter of a few months" for the bank to start lowering interest rates.

Noting that the risk of early easing is higher than the "risk of falling slightly behind," Georgieva expressed that early easing could reverse the gains made.

Emphasizing that the Fed is right to be cautious, Georgieva said, "But don't keep it too tight if you don't have to. In other words, look at the data. Act according to the data."

Georgieva also stated that the US economy is close to a "soft landing" with its strong labor market, but added that this has not yet been achieved.