Will inflation be fleeting or stick around a while to cause all kinds of trouble? 

Inflation is seen as one of the major threats to economic recovery and stock market health. 

The International Monetary Fund (IMF) joins the chorus of those who are becoming concerned that the transitories that include many central bankers and finance ministers should stand on guard. This BBC post shared the warning from the IMF that …  

“Nations must be ‘absolutely vigilant’ about inflation,” says IMF.

While the IMF appears to be of the mind that inflation will hang around, it suggests that the rising costs will be potentially under control in 2022. Central bankers should be ready to act. 

IMF chief economist, Gita Gopinath says, one of the biggest problems was high inflation, particularly in the U.K. and U.S., where it is running at 3.2% and 5.3% respectively. These rates are partly due to a “mismatch between demand and supply,” but also in the case of the UK soaring gas prices.

She says inflation was likely to stabilise in most places by mid 2022, although it would take until 2023 for it to happen in the U.K. However, central banks “should absolutely be vigilant about what’s happening.”

IMF reminds us that hiking interest rates by central banks are the weapons of choice, and the banks should not be afraid to use that stick at the first sign that inflation is getting out of control. 

Source