Governments can and should use fiscal policy to protect the poor amid interest-rate hikes: IMF

content.govdelivery.com/accounts/USIMF/bulletins/352ae95

selected conclusion:

When central banks act alone—without the support of fiscal policy—they need to hike interest rates substantially to fight inflation.

Fiscal tightening makes it possible to increase interest rates by less to contain inflation.

But to safeguard the poor—who benefit more from public services—tax hikes or cuts in lower-priority spending must be combined with larger transfers.

This strategy results, by design, in no drop in consumption for the poor, but also in a lower decline in overall consumption.

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