HE International Monetary Fund (IMF) has warned the Federal Reserve (the Fed) — the US central bank — to avoid “misjudging the policy mix” it is using to calibrate the response to runaway inflation, because of the “sizeable costs at home and negative spillovers to the global economy”.

The US economy has recovered quickly from the pandemic shock as the positive effects of unprecedented policy stimulus, combined with the advantages of a highly flexible economy, have resulted in an unemployment rate that is back at end-2019 levels. Additionally, output is now close to its pre-pandemic trend, wages have increased rapidly for lower income workers, poverty has fallen, and 8.5 million jobs have been created since the end of 2020.

In this context, the IMF in its latest 2022 Article IV Consultation with the United States stressed that the policy priority must be to expeditiously slow price growth without precipitating a recession. The fund, however, concurred that avoiding a recession in the United States is becoming increasingly challenging due to Russia’s invasion of Ukraine, the lingering novel coronavirus pandemic, and supply side constraints.

https://www.jamaicaobserver.com/business/avoid-misjudging-the-policy-mix/