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The International Monetary Fund warns that unemployment will have to rise as part of the fight against inflation
An International Monetary Fund (IMF) official has insisted that unemployment will have to rise as part of the fight against inflation.
Gita Gopinath, deputy director of the IMF, said central banks such as the Bank of England should “stay on track” on rate hikes.
But at the annual meeting of the World Economic Forum in Davos, she said: “All we know about how monetary policy works – when you tighten interest rates that much – is that unemployment is going up.
Jobs warning: IMF deputy director Gita Gopinath said central banks like the Bank of England should ‘stay on track’ on rate hikes
This is how you bring inflation down sustainably.’
Gopinath, 51, said it would be a “tough year” for jobs, but that it would come at a time when unemployment in the US and in the eurozone was at an all-time low.
She added: “We should feel good when inflation returns to more reasonable levels.”
But her comments recognize the reality that raising interest rates to address skyrocketing inflation is likely to lead to the grim consequences of unemployment for many.