Interest rates likely to fall but last mile very tricky: IMF Chief

IMF Chief Kristalina Georgieva on Thursday said interest rates should keep falling in 2024 but cautioned that there is no room for any policy error as the last mile is "very, very tricky".

In an interview with the World Economic Forum here during its Annual Meeting 2024, she said that the central banks should not tighten prematurely because then they may lose the victory that is now in their hands.

Expecting the positive trend to continue in 2024, she said, "The inflation rate is going down, on average." The International Monetary Fund's Managing Director, however, flagged the regional discrepancies still persisting around.

"What we have now is a very diverse range. In some countries, the job is already done, and inflation is low enough for them to have an accommodative monetary policy. Brazil is one example. And in Asia, many countries did not have an inflation problem to start with," she said.

"Central banks should not tighten prematurely because then they may lose the victory that is now in their hands. But if they are too slow, then they could throw cold water on the economy," she cautioned.

She called on policymakers in various countries to continue exercising caution, and to focus on the data.

"The US has a very tight labour market and wages are now going above inflation. What does that mean? People have more money to spend. And when they spend more, that puts pressure on prices upwards. So that last mile is very, very tricky," she said.