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US inflation.

 

US inflation

A top IMF official has warned that inflation in the US has not «turned the corner yet,» and it is too early for the Federal Reserve to declare victory in its fight against soaring prices. Gita Gopinath, the fund’s second-in-command, urged the US central bank to press on with rate increases despite a recent moderation in headline inflation after one of the most aggressive tightening campaigns in the Fed’s history. «If you see the indicators in the labour market and if you look at very sticky components of inflation like services inflation, I think it is clear that we have not turned the corner yet,» she said, adding that the fund’s advice to the Fed was to «stay the course». The comments from the fund’s first deputy managing director come after a flurry of data suggested that inflation in the US, Europe and other economies might have peaked as energy prices fall from recent highs and the cost of goods such as home appliances and used cars starts to decline.

Inflation fell further than expected in France and Germany this week. Figures for eurozone inflation will be released today. The unemployment rate is still hovering near historic lows, and an acute worker shortage has helped push wage increases to a level far too high for the Fed to hit its 2 per cent inflation target. Gopinath said that it was «important» for the central bank to «maintain restrictive monetary policy» until there was a «very definite, durable decline in inflation» that was evident in wages and sectors not related to food or energy.

Minutes from the Fed’s latest meeting in December showed officials thought they must do more to throttle the US economy and stamp out inflation.

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  1. Alberta6 January 2023 at 16:49

    Gita Gopinath is right. We mustn't kid ourselves into thinking everything will be well from now on. The central bank needs to maintain a restrictive monetary policy until there are very clear and durable signs things are heading in the right direction. Right now, that's not the case.

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    1. Martin6 January 2023 at 17:24

      It's good that Gita came out and said this soon after they announced the "good news". Lots of people got overly excited at the potential implications of yesterday's news and I think that was and is a mistake. Things are just looking promising but there's a very long way to go.

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