FirstFT: IMF calls for vigilance over inflation risks

The global economy is entering a phase of inflationary risk, the IMF warned yesterday, as it called on central banks to be “very, very vigilant” and take early action to tighten monetary policy should price pressures prove persistent.

The fund was highlighting the new risks in its twice-yearly World Economic Outlook, which also warned of slipping momentum in global growth after a strong recovery so far this year.

Gita Gopinath, the IMF’s chief economist, said the strength of the economic recovery meant it was too early to “say anything about stagflation”, despite some supply shortages which have also boosted inflation.

Line chart of Core consumer price index change YoY (%) showing Underlying inflation is rising across the world in 2021

“We always knew coming out of this deep contraction that the supply-demand mismatch would pose problems,” she told the Financial Times.

“The hope was that it would even itself out by around this time of the year . . . But we’ve been hit with additional shocks, including some weather-related shocks, that certainly makes that imbalance persist longer,” Gopinath said.

The IMF’s central forecast is that inflation will rise sharply towards the end of the year, moderate in mid-2022 and then fall back to pre-pandemic levels. But its report also noted that “inflation risks are skewed to the upside” and advised central banks to act if price pressures showed signs of lasting.

More IMF news: The IMF’s executive board has opted to retain Kristalina Georgieva as the institution’s managing director and said it had “full confidence” in her ability to carry out her responsibilities, despite allegations she pressured World Bank staff when she was its chief executive to manipulate data to China’s benefit.

Thanks for reading FirstFT Asia. Here’s the rest of today’s news — Emily

Five more stories in the news

1. Evergrande bondholders missing interest payments International investors say they have not received interest payments totalling $148m on dollar-denominated Evergrande bonds they own. The deadline for the payment was midday yesterday in Hong Kong, according to two people familiar with the matter.

2. EU launches largest-ever green bond The €12bn sale of 15-year debt attracted more than €135bn of orders and marked the largest green bond deal, narrowly eclipsing the UK’s £10bn debut last month, as Brussels kicked off its efforts to become the world’s biggest issuer of sustainable debt. More on the latest environmental, social and governance news in our Moral Money newsletter. Sign up here.

3. US bank chiefs confident supply chain disruptions are ‘transitory’ The widespread supply chain disruptions plaguing manufacturers and retailers across the world will probably work themselves out over the next few months, chief executives of the largest US banks have said.

4. China power crisis sparks rush for generators Desperate factory owners in China are increasingly turning to diesel generators to keep their businesses going during a power crisis that is threatening both the country’s economic growth and its green ambitions.

Related read: China thermal coal futures hit a second day of record highs on Tuesday, as flooding in the country’s mining regions crimped supplies.

5. South Korea’s ‘Bernie Sanders’ touts universal basic income A universal basic income of more than $400 a month is moving closer to reality for South Koreans. Lee Jae-myung, who won the ruling party’s primary race this weekend, has vowed to progressively roll out the policy if elected in March.

Coronavirus digest

Britain’s latest labour market figures showed job vacancies have hit a record 1.1m, with fewer unemployed people for each vacancy than before the pandemic. Meanwhile, the IMF has warned the coronavirus crisis is set to bring more longer-lasting damage to the UK than any other country in the G7.

Merck will double manufacturing capacity for its Covid-19 antiviral pill as governments scramble to procure the treatment.

A G20 plan to give debt relief to poor countries during the pandemic has fallen far short of expectations, with low-income borrowers deferring less than a quarter of the repayments they owed, a report has found.

The day ahead

China monthly trade figures China’s trade growth in September is expected to show a deceleration when figures are released today. My colleague Aime Williams explained her takeaways from US trade representative Katherine Tai’s speech on US-China trade policy in the Trade Secrets newsletter. Sign up here.

IEA World Energy Outlook report The International Energy Agency will today release its annual report, which is expected to shed light on the state of energy demand and supply, and its effects on climate and the global economy. Elsewhere in the energy sector, Opec will release its monthly oil market report amid soaring US petrol prices. (IEA, FT)

Earnings JPMorgan Chase will today provide a broader outlook on loan demand (which has been soft) and overall consumer spending, which has recovered but could be under threat from the coronavirus Delta variant. BlackRock will also report on Wednesday.

Join us for FT Live’s Asia Insurance Summit on October 28 for resilience and growth strategies from our panel of regulators, CEOs and other senior executives from across the industry.

What else we’re reading and listening to

Hopes and fears for the global Covid-19 recovery As economies exit the pandemic, the job of central banks is relatively simple — less generous, better targeted assistance, writes Martin Wolf, sharing his analysis of the latest World Economic Outlook and Global Financial Stability Report from the IMF.

How Elon Musk’s new rocket could transform space race Elon Musk hopes the SpaceX Starship will help take humans to Mars. Rivals fear the entrepreneur will not only dominate deep space exploration, but disrupt the economics of the launch business and transform the space race.

Why quitting your job is good for the economy Much has been written about why Americans are quitting their jobs in higher numbers than at any point since the turn of the millennium, writes Sarah O’Connor. It isn’t just an interesting sociological phenomenon, she says, but has an under-appreciated bearing on pay and productivity.

Bart van Ark: ‘Productivity is done by the private sector’ With global supply chains under strain, the head of the UK’s Productivity Institute explains how to revive economic performance. Van Ark’s role has proven to be one of the most challenging positions in economics.

Listen: ‘My life expectancy was nine years old’ Many people in their 30s, 40s and even 50s have yet to start saving for retirement and are anxious about how to begin, including this week’s Money Clinic guest David, who was diagnosed with cystic fibrosis and never thought he would reach retirement. But thanks to a new treatment, he is now planning for his future.

Food and drink

Eijiro Tsukada, dubbed by the FT’s Leo Lewis as the “Steve Jobs of drinks”, believes the next big thing will be freshly brewed powder matcha green tea — and Tsukada’s instincts are usually right. He’s created the Cuzen Matcha, a beautiful device of his own design, calculatedly intended for global colonisation of the discerning home, office and café.

© Pâté
© Pâté

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