For the IMF, global inflation is not lowered only by raising interest rates

The authors suggested that there is no single recipe for fighting inflation, since “The answer depends both on the distribution of shocks in the economy and on how central banks (and finance ministries) react.” They also stated that these price increases would not be detrimental in the long term.

In this sense, the IMF text explains that “the duration of the current episode of inflation -(which affects the world in general)- will depend on (the interaction between the continued tightness of the labor market and supply chain bottlenecks and the response of the central bank and the duration of the war in Ukraine and its impact on energy prices, food world prices and growthamong the main causes.

They venture that these price increases would not be detrimental in the long term. “If history is any guide, we won’t see inflation runaway more than a couple of years into the future,” although some countries may lose their blue chip status (inflation of up to 4% a year for three consecutive years), largely due to inflation that has already taken place during the pandemic, they warned.

“Central banks’ aversion to inflation may be suppressed given the long-term, lasting impact of the pandemic, uncertainty about the recovery, and the temptation to inflate higher debt loads globally.”explain the economists about the usual policies of central banks to combat inflation, which include, for example, withdrawing money held by consumers.

Those resisting lowering inflation, and thus “ending the recovery prematurely, cite lower labor force participation compared to pre-pandemic levels,” they noted. Consequently, They explain that many banks today have reference rates much lower than they should be to fight inflation, because they continue to prioritize recovery.