The head of the International Monetary Fund has warned it could continue to get more difficult for central banks to bring inflation under control.
Speaking to Reuters at a meeting of G-7 finance ministers and central bank governors on Thursday, IMF Managing Director Kristalina Georgieva said policymakers may well have to get used to handling several sources of inflationary pressure at once.
She pointed to the current economic climate, in which central bankers were dealing with downward pressure from global challenges including the war in Ukraine and China’s zero-COVID policy.
Georgieva told Reuters she no longer viewed spiraling inflation as a fleeting phenomenon, and had stopped treating it as such when the Omicron COVID wave hit last winter.
“I think what we need to start getting more comfortable with is, that may not be the last shock,” she told the news agency.
“The COVID-19 pandemic is not over and there could be another crisis.”
Strong demand levels in the U.S., Russia’s invasion of Ukraine and global supply chain disruption all suggested inflation would be longer-lasting than initially anticipated, Georgieva added.
Last year, many top officials around the world — including the heads of the Federal Reserve, the Bank of England and the European Central Bank — said they believed surging inflation was “transitory.”
China’s zero-COVID policy unworkable
Georgieva also described China’s zero-COVID policy — which has disrupted international supply chains with its weeks-long lockdowns in major cities — as unworkable on Thursday.
The WHO has also criticized Beijing’s COVID elimination strategy, with the organization’s Director-General Tedros Adhanom Ghebreyesus calling the policy “unsustainable” in the face of increasingly transmissible virus variants.
However, Georgieva said officials in Beijing were “digging their heels in” to defy suggestions that China should take a new approach to tackle the pandemic.
China’s zero-COVID policy has seen a lockdown in Shanghai that has lasted more than six weeks and created severe economic consequences.
The combination of various factors including the pandemic, supply bottlenecks and the Ukraine war have sent inflation surging way above central banks’ targets in markets all over the world.
In March, U.S. inflation hit a 40-year high of an 8.5% year-on-year increase, prompting the Federal Reserve to carry out the biggest incremental interest rate hike since 2000.
The Fed’s inflation target is 2%.