IMF Chief Sees Risk Of Sustained Rise In U.S. Inflation

• The International Monetary Fund on Wednesday said further fiscal support in the United States could fuel inflationary pressures and warned that the risk of a sustained rise in prices could require raising interest rates earlier-than-expected. 
• Higher U.S. interest rates, in turn, could lead to a sharp tightening of global financial conditions and significant capital outflows from emerging and developing economies, IMF Managing Director Kristalina Georgieva said in a blog published Wednesday with the IMF's surveillance note for G20 countries. 
• The IMF's assessment of U.S. inflation risks comes amid sharp criticism by Republican lawmakers of President Joe Biden's multi-trillion-dollar plans to boost spending on infrastructure, child care, community college tuition and expanded coverage of home care for the elderly and disabled. 
• Georgieva said an accelerated recovery from the COVID-19 pandemic in the United States, where growth is seen reaching 7% in 2021, would benefit many countries through increased trade, but rising inflation could be more sustained than expected. The IMF forecasts global growth of 6%. Other countries face rising commodity and food prices, which are now at their highest level since 2014, putting millions of people at risk of food insecurity, the IMF said in its report. 
• The IMF urged countries to continue accommodative monetary policies, while closely monitoring inflation and financial stability risks. In countries where the recovery was accelerating, such as the United States, it would be "essential" to avoid overreacting to transitory increases in inflation, Georgieva said.

(Source: Reuters)