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Continued federal economic stimulus could drive inflation faster, requiring the U.S. Federal Reserve to raise interest rates sooner than it now plans to, the International Monetary Fund (IMF) warned in a 7 July public statement.
Higher U.S. interest rates could pressure other countries to increase theirs. The resulting higher yields on government bonds could suck capital out of emerging markets, the IMF said.
“While further fiscal support in some major advanced economies, including the U.S., would benefit growth more broadly, it also could further fuel inflationary pressures,” the statement noted.
Inflation already is running hotter in Britain, the Eurozone, and U.S. while proceeding more slowly in places such as Japan, according to the IMF.
The IMF’s call for caution in government spending comes at a time when president Joe Biden is pressing Congress to allot trillions of dollars in new spending for everything from public water systems to universal broadband access to child care.
The U.S. economy will grow seven percent this year, the IMF has forecast, which would benefit many countries through additional trade.
However, inflation may run higher and last longer than expected, the fund noted.
G-20 nations must act urgently to speed vaccinations to countries where injection rates are lagging, IMF president Kristalina Georgieva said.
Otherwise, the world risks a “worsening two-track recovery” that allows a few nations to do well economically while leaving dozens of other countries struggling, she said.
TREND FORECAST: Again, we have been on the forefront of inflation and what to expect, which is now being recognized globally. Across the world, nations will continue to push stimulus policies to sustain the artificial economy they have created with their endless flood of cheap money.
Thus, the more cheap money pushed into economies, the lower the value of the currencies. And, the lower the value of currencies, the more it costs to purchase products… which in turn equals inflation… paying more to buy less.