It’s too early to be conclusive about the level of central-bank rate cuts this year, according to Gita Gopinath, deputy managing director of the International Monetary Fund.
“The markets are expecting central banks to cut rates pretty aggressively–I think it’s a bit premature to make that conclusion,” she told a panel discussion at the World Economic Forum in Davos.
The job of central banks in bringing down inflation is not yet done, she argued, highlighting relatively tight labor markets in the U.S. and euro area. Interest-rate cuts will more likely come in the second half of 2024, and, longer term, policy rates will be on average higher than the low-rate period after the 2008 financial crisis, Gopinath said.
She also said central bank quantitative easing should be treated with more skepticism in the current economic environment.