Higher U.S.
interest rates, in turn, could lead to a sharp tightening of global financial conditions and significant capital outflows from emerging and developing economies, IMF Managing Director Kristalina Georgieva said in a blog published Wednesday with the IMF’s surveillance note for G20 countries.

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inflation risks comes amid sharp criticism by Republican lawmakers of President Joe Biden’s multi-trillion-dollar plans to boost spending on infrastructure, child care, community college tuition and expanded coverage of home care for the elderly and disabled.

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In countries where the recovery was accelerating, such as the United States, it would be “essential” to avoid overreacting to transitory increases in inflation, Georgieva said. (Reporting by Andrea Shalal; Editing by Leslie Adler)

Georgieva repeated her call for urgent action by the G20 countries to accelerate vaccinations to high-risk populations, warning of a “worsening two-track recovery” that is leaving a large number of countries behind while the United States, China, the euro area and a few others are recovering quickly.

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The IMF said the global economic outlook remained uncertain given questions about the evolution of the pandemic and progress on vaccinations, as well as the possibility that the pickup in inflation would prove “more persistent” than expected.

WASHINGTON, July 7 (Reuters) – The International Monetary Fund on Wednesday said further fiscal support in the United States could fuel inflationary pressures and warned that the risk of a sustained rise in prices could require raising interest rates earlier-than-expected.

The IMF was working with the World Bank and other institutions to move forward on its $50 billion plan to end the pandemic, she said, arguing that quicker progress could result in trillions of dollars of added global economic output.

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