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WATCH LIVE: Yellen holds news conference during IMF-World Bank spring meetings
PBS NewsHourDec 24, 2022
The Facts
The International Monetary Fund (IMF) forecasts that increased interest rates in major economies are likely temporary and will reduce once rising prices, caused by factors including the Ukraine War's impact on energy costs, are halted and reverted downwards.
While interest rates have been on the rise as central banks fight inflation, IMF analysts concluded in the latest World Economic Outlook that the "natural" rate of interest, which neither stimulates nor discourages economic activity, wasn't changed by the pandemic.
The Spin
Narrative A
Interest rates will not be going down any time soon — in fact, some estimates say they could hit 5.5% in the near future. Central banks’ primary goal must be fighting inflation, and interest rates must remain high in order to get near the 2% goal. It's hard to envision any circumstance where rates go down because if they do, inflation will soar even further out of control.
Narrative B
As prices have already been falling after a decline in global energy and shipping costs, inflation is likely to fall below target, and central banks must revisit their current high interest rate policy. While there were reasons to hike rates when energy prices were on the rise and supply chains were bottlenecked, keeping them at this level now can only cause recessions and unemployment.
