WASHINGTON BRUSSELS, Oct 14 Reuters : The International Monetary Fund's steering committee is urging global policymakers to increase the monitor of inflation dynamics and be ready for decisive actions to maintain price stability, a draft communique seen by Reuters showed.
The statement, to be released by the Fund's International Monetary and Financial Committee IMFC on Thursday, highlights significantly increased concerns at this week's IMF and World Bank Fall meetings that inflation spikes may prove more durable.
The 24 - Member IMFC said inflation was being aggravated by pent up consumer demand, pandemic-induced supply chain disruptions and a sharp rise in energy and commodity prices.
The current surge in inflation is estimated to be mainly driven by those temporary factors but now appears less transitory than previously expected, and upside risks to the inflation outlook are increasing in a wide range of countries, the committee said.
It added that some central banks have taken proactive measures to begin withdrawing monetary stimulus to avoid a potential de-anchoring of inflation expectations.
The IMFC called for central banks to remain vigilant for second-round effects of inflationary forces and deliver clear communications on shaping expectations.
Special attention should also be given to the build-up of financial vulnerabilities arising from house price increases, historically high asset prices, increasing crypto asset related activities and the withdrawal of support measures, the panel added, adding that macroprudential and regulatory tools should be used to mitigate risks going forward.
With many low-income IMF member countries facing stronger recoveryies, the IMFC also reiterated its support of strengthening Fund Engagement with these countries, with an emphasis on more urgent financing arrangements requiring structural reforms than on emergency financing.
With the IMF developing a new Resilience and Sustainability Trust to help channel a $650 billion allocation of reserves to a broader range of vulnerable middle-income countries, the IMFC cautioned that the new vehicle needed to be in line with the IMF's mandate as the world's crisis lender.
On Wednesday, G 20 finance leaders said they were open to exploring options to channel some SDR reserves to poorer countries through multilateral development banks, but the IMFC cautioned against this.
In general, we also deem it important that the IMF closely cooperates with multilateral development banks; however, we see less scope for channeling SDRs through these institutions, given that a shift towards development financing would constitute a departure from the IMF's existing model, the draft statement said.