Instead of continuing to raise interest rates, a senior International Monetary Fund official is urging governments to apply more fiscal discipline to reduce inflation. A very delicate balance that can be achieved without further disrupting the system.
Why is this important?
The choice between higher interest rates by central banks or greater budget discipline by governments represents a choice between two evils for citizens. Neither solution is truly simple, and each comes with its own burden on the pocketbook. High interest rates limit access to credit, while budget decisions have ripple effects throughout the economy that directly affect household finances. Finding the right balance can be too complex for some governments…In the news: Vitor Gaspar, director of finance at the International Monetary Fund, says governments should not remain negative about inflation:
- He stresses that government spending must be controlled and revenues must be increased.
- “Timing is important, and the sooner we implement this in as many countries, the better it will be in terms of coherence between monetary and fiscal policies,” Vitor Gaspar said. Financial Times.
- With cascading effects:
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