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IMF's Georgieva Says 'Some Pain' May be Necessary to Fight Inflation

IMF's Georgieva Says 'Some Pain' May be Necessary to Fight Inflation

Saturday, 25 June, 2022 - 05:15
File photo: International Monetary Fund (IMF) Managing Director Kristalina Georgieva speaks during a joint news conference at the end of the Summit on the Financing of African Economies in Paris, France May 18, 2021. Ludovic Marin/Pool via REUTERS

The head of the International Monetary Fund on Friday underscored the importance of fighting inflation now to shore up the prospects for economic growth in the future, warning that doing so could cause "some pain" to consumers in the short run.

"Success over time (in lowering prices) will be beneficial for global growth, but some pain to get to that success can be a necessary price to pay," Kristalina Georgieva said, as the IMF cut its US growth forecast for 2022 by 0.8 percentage point to 2.9%.

Georgieva said the IMF believed the United States could escape a recession, but warned that the outlook had "significant" downside risks.

The Fed last week implemented the biggest increase in its benchmark lending rate in nearly 30 years, as part of its aggressive effort to quell inflation that is at a four-decade high and squeezing American families struggling with rising prices for gasoline, food and housing.

The US economy already was seeing strong demand clashing with supply snarls due to pandemic lockdowns in China and elsewhere, when Russia invaded Ukraine, which has intensified the inflationary pressures.

For 2023, growth is expected to slow to 1.7 percent, but "narrowly avoid" a recession, according to the annual review of the US economy, known as the Article IV consultation.

The IMF chief said the battle against inflation must be the "top priority" despite the impact a US slowdown might have on the global economy.

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