Priorities for authorities in the face of an uncertain and volatile world economy

Speech by Kristalina Georgieva, IMF Managing Director, at the Opening Remarks of the annual IMF meetings. She provides some recommendations to policymakers to navigate the current complex scenario where world economy is experiencing a fundamental economic shift from a world of relative predictability and stability to greater uncertainty and volatility. She warns that in this context the price of policy missteps is very high.

Kristalina Georgieva calls policymakers to act with a sense of urgency now, and to act together in the following priorities:

• To bring inflation down even if it means further interest rate hikes at the expense of economic growth. Not tightening enough to put a leash on inflation would mean interest rates staying higher for longer, resulting in even more harm to growth and people.
• To act now to put in place responsible fiscal policy. Protecting vulnerable households and businesses must be prioritized. Public support measures need to be temporary and well-targeted. Steer away from across-the-board fiscal support that is neither effective nor affordable.
• We must ensure that fiscal and monetary policies go hand in hand. When monetary policy hits the brakes, fiscal policy should not step on the accelerator that would make for a very dangerous ride.
• To act now to safeguard financial stability, particularly as financial sector risks are rising. Macroprudential policies need to be even more vigilant and proactively address pockets of vulnerability specially on emerging markets hit by a stronger dollar, high borrowing costs, and capital outflows.
• We need stronger efforts to confront food insecurity: As 345 million people are acutely food insecure and are at risk of dying because of hunger.
• We need transformational reforms to address climate change, to make digitalization work for people, and to reduce inequality.