Financial Associated Press (Shanghai, edited by Bian Chun),worldBankChief Economist Carmen Reinhart said in an interview with the media a few days ago that the Fed should tighten as soon as possiblecurrencypolicy to stop inflation from becoming “pretty persistent”.
Reinhart said the Fed’s delay in raising rates would only prolong the problem. He has been warning for some time that supply chain shocks could lead to persistent inflation in the U.S. and elsewhere.
“If inflation is indeed more persistent, my bottom line on Fed policy is … if you do it now, it’s better than doing too little, too late,” Reinhardt told the World on Tuesday.Banksaid before the release of the World Development Report.
Reinhart said the Fed has been signaling moderate tightening by historical standards, but given recent data, the Fed may change the pace of tightening. “I think if the trend is to delay action and be more cautious, that’s basically just pushing back the current issues,” she added.
Reinhart has argued for a year that rising inflation is unlikely to be temporary, as supply chain shocks have hit commodity prices, transportation costs, global shipping and other sectors.Escalating tensions between Ukraine and Russia fuel inflationary pressures, leading tooil priceIt rose 77% from December 2020 to last month.
“None of this is temporary, and inflation proves that few things in life are permanent, but many things are fairly permanent,” she said.
Delaying action has huge long-term costs
In a paper published last week, Reinhardt and World Bank economist Clemens von Luckner said more timely and stronger action by major central banks would pushGao Xinxingfinancing costs for markets and developing economies, and may exacerbate existing debt crises.
But they also noted that the long-term costs of delaying action would be enormous. As the U.S. and other advanced economies failed to quickly address inflation in the 1970s, they eventually needed to implement tougher policies, which triggered the U.S.’s second-biggest post-World War II recession and developing countries, they wrote. debt crisis.
Fed policymakers remain divided on how aggressively to raise rates in March
Fed officials are still wrangling over how aggressively to start raising interest rates at their March meeting, and the final inflation readings ahead of the two-day meeting could be extremely significant.
St. Louis Fed President Bullard on Monday again called on the Fed to speed up the pace of interest rate hikes. He previously said on Thursday that he supported a cumulative 100 basis point rate hike by early July, including a one-off 50 basis point increase for the first time since 2000, to tackle the worst inflation in four decades.
But other Fed officials were less willing to commit to raising rates by 50 basis points, even fearing it could spell trouble. Richmond Fed President Barkin said recently that it is “timely” to start raising interest rates, but the specific situation will depend on the upcoming inflation report.
(Article source: Financial Associated Press)