Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), spoke to CNBC on the ECB Forum in Portugal.
Bloomberg | Bloomberg | Getty Images
Major central banks will have to keep interest rates high for much longer than some investors expect, Gita Gopinath, first deputy managing director of the International Monetary Fund, told CNBC.
“We also have to admit that central banks have done quite rather a lot… But that being said, we imagine they need to proceed tightening and, importantly, should remain high for a while,” Gopinath Annette Weisbach of CNBC told the European Central Bank Forum in Sintra , Portugal.
“Now, for example, that is different from what several markets expect, namely that interest rates will fall in a short time. I feel they need to be placed on hold much longer,” she said.
The ECB began raising interest rates in July 2022 and has since raised its key rate from -0.5% to 3.5%. The US Federal Reserve, meanwhile, began its rate hike cycle in March 2022, but decided to take a break this month by moving away from Europe.
AND study of American economists in late May showed that that they had shifted their expectations for a rate cut by the Fed from the last quarter of this 12 months to the primary quarter of 2024.
Nevertheless, it is evident to the IMF that curbing inflation have to be a priority.
“Inflation is taking too long to return to goal, which implies that central banks will have to stay committed to fighting inflation, even when it means risking weaker growth or much more cooling within the labor market,” Gopinath said.
She described the present macroeconomic picture as “very uncertain”.
That is an evolving story and will be updated soon.