Financial tightening yet to ‘bite’ unemployment: IMF

Washington (AFP): Countries have yet to see the full impact of tightening financial conditions, IMF chief Kristalina Georgieva said Thursday, warning that central banks have some way to go in their inflation battle.

Global growth is expected to slow further this year, as central banks including the US Federal Reserve have raised interest rates to cool surging prices.

While sectors like housing have been reeling in the United States for example, the labor market remains strong with low joblessness.

“As long as people are employed, even if prices are high, consumers spend… But we all know that the impact of tightening financial conditions is yet to bite, in terms of unemployment,” Georgieva told reporters in a briefing on the world economy.

“Inflation remains stubborn, and in that sense, the job of central banks is not yet done,” she said.

This suggests that central banks may need to continue hiking interest rates, walking a fine line between lowering demand and avoiding tipping economies into recession.