Washington DC, 12 August 2022 (TDI): Kristalina Georgieva, the Managing Director at International Monetary Fund (IMF), has urged Central Banks (CBs) to act swiftly to stem the tide of inflationary pressures.
Furthermore, along these lines, numerous emerging economy Central Banks increased interest rates early last year, followed in 2021 by developed economies.
We’ve called for decisive action by central banks to turn the tide of rising inflation.
Many emerging market CBs began hiking interest rates early last year, followed by advanced economies later in 2021. This #IMFBlog explains how policies are evolving. https://t.co/a6MuRS5A6Q pic.twitter.com/5EXFzDAtNC
— Kristalina Georgieva (@KGeorgieva) August 10, 2022
In the same vein, to improve economic position and encourage economic rehabilitation, mostly during pandemics, Central Banks (CBs) have taken steps ahead.
The CBs through both developed and emerging market economies, have started taking extraordinary actions, such as lowering interest rates and buying assets.
Furthermore, Lawmakers have shifted forward into tighter regulation.
This has been done as a result of inflation reaching multi-decade peak levels. The peak levels have been faced throughout many regions and increased pressure extending further than the cost of food and energy.
The Chart of the Week below demonstrates Central Banks in many developing markets. It also shows how constructively the markets began raising interest rates last year.

Their equivalents in developed economies did the same in the final few months of 2021. Moreover, the rotation of monetary policy seems to be becoming more globally synchronized.
Also, more saliently, both the occurrence and the magnitude of rate hikes are increasing in several nations, especially in advanced economies. Hence, some Central Banks have started to shrink their balance sheets to bring policy closer to normalization.
A necessary condition for continued economic growth is stable prices. Therefore, Central Banks should always continue normalizing to keep inflationary pressures from becoming firmly embedded.
CBs should normalize even though the consequences to the inflation outlook are shifted to the positive side. To prevent a de-anchoring of expected inflation which might jeopardize the legitimacy developed over the years, they must act decisively to introduce inflation ahead to their objective.
Additionally, the capacity of central banks to offer straightforward instruction about the future course of policy is hampered. This is led by the high degree of ambiguity obscuring the financial and inflation outlook.
Therefore, to maintain credibility, however, clear communication from central banks regarding the necessity of tightening policy even further and the steps necessary to keep inflation is essential.
Lastly, to prevent a sudden, unorganized toughening of financial circumstances that could communicate with and intensify current financial security flaws is needed. Endangering future impressive economic growth and effective communication is also essential.