IMF urges central banks to keep monetary policy loose

WASHINGTON - The International Monetory Fund urged central banks to maintain ultra-loose monetary policy in order to prevent a slowdown in the global economic recovery.

The Fund dismissed recent sharp price rises as purely “transitory” and said central banks should “avoid tightening until there is more clarity on underlying price dynamics.” However, it did say central banks should be “prepared to move quickly.”

“The current spikes in annual inflation in part are the result of mechanical
base effects from last year’s low commodity prices. Moreover, prices have increased
because of the likely transient supply-demand mismatches,” it said.

Latest data shows inflation in the UK is already running higher than the Bank of England’s target, up 2.5 per cent annually in June.

Criticism of central banks’ adherence to quantitative easing is intensifying, with members of a House Lords committee publishing a report last week accusing QE of widening wealth inequalities.

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