‘It’s not done’: IMF head warns of costs in finally overcoming inflation

The head of the International Monetary Fund has warned that victory in the fight against inflation could spell trouble for financial markets by forcing central banks to keep interest rates high until 2025.In a Guardian interview before next week’s IMF annual meeting in Marrakech, Kristalina Georgieva said there was a risk of borrowing costs staying high for a protracted period, with knock-on effects for asset prices.The fund’s managing director said there had been progress in the struggle to bring inflation down but some countries had done better than others.“It’s not done, and that puts a question mark over the longevity of high interest rates – certainly through 2024 and maybe all the way to 2025. So you have weak growth prospects and tighter financial conditions,” said Georgieva.Bond yields, a measure of the cost of servicing government debt, have soared in developed-country markets in the past week as investors have realised that official interest rates could remain higher for longer.Georgieva said there had been a “pile-up” of asset valuations before it dawned on businesses that it would take time for interest rates to start coming down. “So now inflation expectations have moved up, is there a risk of a sharp repricing and then financial stability considerations?”She has just completed the fourth year of her five-year term as IMF managing director, a period she said had been dominated by two “u …

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