IMF urges central banks to move cautiously on any rate cuts

WASHINGTON: The No. 2 official at the International Monetary Fund on Monday said inflation had come down in many countries and the global economy appeared headed for a soft landing, but central banks should to move cautiously on any interest rate cuts.

“It is important to move cautiously on rate cuts, because ... you have to once you have an interest rate cut, the direction of travel becomes very clear and then everybody expects many more rate cuts, and then you end up with a lot more financial easing than you intended to have,” she said in a live online interview with Foreign Policy magazine.

Looking at the United States and the strength of labor market and consumer demand, Gopinath said it would make sense for the Federal Reserve to move cautiously and hold off on rate cuts until the second half of 2024.