In an article that analyses the impact of sub-prime woes on the economy, Dominique Strauss-Kahn, managing director of the IMF, says governments must stay on task if growth is to flourish in the medium term.
He says: “Inflation has risen to its highest levels in more than a decade in developed and emerging countries.
“Fiscal, monetary and exchange rate policies must respond expeditiously to the increasing inflation risks. Failure to do so could undermine medium-term growth and poverty reduction efforts.”
His remarks follow inflationary highs, with the Consumer Price Index reporting inflation at 4.7% – 2.7% off the target set by the Monetary Policy Committee.
The Bank of England refused to comment.
But in a letter to chanmervyn kinginflation still the prioritycellor Alistair Darling, BoE governor Mervyn King says: “Painful experience has shown that if we allow an increase in inflation to become embedded in expectation, a prolonged period of depressed activity and high unemployment is ultimately required to get inflation back down.”