IMF urges UK to tighten monetary and fiscal policy

The International Monetary Fund (IMF), in an annual report published on Tuesday, called on the United Kingdom to tighten its monetary and fiscal policy to counter inflationary pressures, while the recovery after the containment has been faster than expected. . However, he cautions that the choice of pace of this tightening is significant and may need to be slowed if the impact of the Omicron version of Covid-19 proves stronger than expected and could result in more severe activity restrictions or a Decline consumer confidence.

Notably, IMF Managing Director Kristalina Georgieva said in a virtual press conference that if the impact of the new version was severe, especially if it was less sensitive to vaccines, it could have a deflationary and non-inflationary effect.

,Monetary policy should withdraw the extraordinary support provided in 2020-2021», especially with historically low significant rates and record asset redemptions. ,But given the shadow of Covid-19 and Omicron Edition, officials will have to weigh the risks by choosing the paceRegarding the withdrawal of these measures, note the report published on Tuesday. He also recommended that the budget be extended by a year to 2022-2023, unless the severity of various risks to destabilize the economy. Don’t pick it up

“Evaluate the use of fiscal action margin”

,Inflation was already a challenge for Omicron“with some”Strained supply chain, inflation of food and energy prices in some places and labor shortageIn some areas, underlined Kristalina Georgieva. The IMF expects inflation in the country to exceed 5.5% during 2022, in line with forecasts from the Bank of England.

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The IMF director argued that the world is learning to live with the virus and its impact on the economy is becoming less and stronger. as a result”We need to assess the use of fiscal action margin“. According to him, the priority for the UK and the world is to strengthen the anti-Covid vaccination program on a large scale, which can especially prevent the development of new variants.

,Thanks to a rapid vaccination campaign, the UK economy reopened in the summer of 2021. The recovery was faster than expected as well as strong and sustained (government economic) support.”, notes the report. Mecca “New COVID-19 variants pose downside risk to outlook“. Kristalina Georgieva said that if measures to restrict activity are decided, the British government should take support measures for vulnerable people and businesses.

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