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, a top IMF official has warned.
In an interview with the Financial Times, Gita Gopinath, the fund’s second-in-command, urged the US central bank to press ahead with rate rises this year despite a recent moderation in headline inflation following 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’s clear that we haven’t turned the corner yet on inflation,” she said, adding that the fund’s advice to the Fed was to “stay the course”.
The comments from the fund’s deputy managing director come after a flurry of data suggested 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.
Chief among Gopinath’s concerns is the continued resilience of the labour market, which on average is adding roughly 400,000 jobs each month. The unemployment rate still hovers near historic lows and an acute worker shortage has helped to push wage increases to a level that is far too high for the Fed to hit its 2% inflation target.
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