IMF boss warns on inflation shocks

IMF Managing Director Kristalina Georgieva. [AP] 

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Thursday that global finance leaders may need to become more comfortable with fighting multiple bouts of inflationary pressures.

Ms Georgieva told Reuters that it was getting harder for central banks to bring down inflation without causing recessions, due to mounting pressures on energy and food prices from Russia’s war in Ukraine, China’s zero-Covid policies that have slashed manufacturing with lockdowns, and the need to reorder supply chains to make them more resilient.

“I think what we need to start getting more comfortable with is, that may not be the last shock,” she said, noting that she stopped viewing inflation as a “transitory” one-time shock when the Omicron Covid-19 outbreak took hold late last year.

She said strong demand from the US, supply chain disruptions and the Ukraine war effects all point to longer-lasting inflation.

The Covid-19 pandemic is not over and there could be another crisis, she added on the sidelines of a G7 finance ministers and central bank governors meeting in Germany.

China’s zero-Covid policy, which has led to widespread lockdown in major cities, is unworkable due to highly contagious variants, but officials in Beijing are “digging their heels” in to resist altering it, she said, adding that its effects would be discussed at the meeting.

She said she was “actually not too worried” about China’s economy because the Beijing has fiscal and monetary policy space to support growth.