WASHINGTON, – The No. 2 official at the International Monetary Fund said on Monday that inflation had eased in many countries and that the global economy appeared headed for a soft landing, but central banks should act cautiously on any interest rate hikes.
“It’s important to move carefully on rate cuts because … you have to, when you have interest rates, the direction of travel becomes very clear and then everyone expects many more rate cuts, and then you end up with a lot more financial easing than you intended to have,” she said in a direct online interview with Foreign Policy magazine.
Looking at the US and the strength of the labor market and consumer demand, Gopinath said it would make sense for the Federal Reserve to move cautiously and hold off on rates until the second half of 2024.
(Reporting by Andrea Shalal)