“If you do more now, you’re better off than if you do too little, too late,” he added shortly before the World Bank releases a report on economic development.
Reinhart has long warned that supply chain shocks could lead to sustained inflation in the US and elsewhere, due to the impact on commodity prices, transportation and global shipping, among other items. Therefore, the delay in raising interest rates would only prolong the problem in his view.
Like little, the Ukraine-Russia crisis is exacerbating inflationary pressures that have caused oil prices to climb 77% from December 2020 to last month.
“All of this is not temporary and inflation shows that very few things in life are permanent, but many are quite persistent,” said the World Bank economist.
Fed officials remain divided on how aggressively they should start the next interest rate hikes at their March meeting.
St. Louis Fed President James Bullard on Monday reiterated calls for a faster pace of rate hikes, but other central bankers have been reluctant to commit to more radical hikes.
In an article published last week, Reinhart and his colleague Clemens von Luckner warned that a more timely and robust response from major central banks would increase funding costs for emerging markets and developing economies and could worsen existing debt crises. .
However, they noted that the long-term costs of delaying this action would be even more severe, as the United States and other advanced economies failed to tackle inflation quickly in the 1970s and ultimately required much more draconian policies, which triggered a severe recession and a debt crisis in developing countries.
Source: Ambito
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