IMF warns United States has not 'turned the corner yet' on inflation

While the UK is facing a record inflation rate that remains near a 41-year high of 11.1%, underlining the recession risks, the International Monetary Fund (IMF) on Thursday warned the United States that it has not "turned the corner yet" to be able to control the rising prices.

In an interview with the Financial Times, IMF's top economist Gita Gopinath, a deputy managing director of the Fund, appealed to the US central banks to hike the rates this year, warning that it may be too early for the Federal Reserve to declare victory on the looming recession.

IMF official stressed that the Feds must not abandon last year’s restrictive monetary policy, adding that it is essential that US Federal Reserve, which equates with central bank, must “stay the course." She urged that the lawmakers bolster efforts to lower prices until there was a “very definite, durable decline in inflation” that does not include just food or energy sector. 

"If you see the indicators in the labour market and if you look at very sticky components of inflation like services inflation, I think it's clear that we haven't turned the corner yet on inflation," IMF's Gita Gopinath told the paper. 

Inflation rate could drop below 7%

IMF's warning to the United States come as the markets are set to brace for the next set of CPI data in the upcoming week and there has been unease about Fed policies. The consumer price index (CPI) for December due Thursday, January 5 would be a vital release that will likely lead to aggressive Fed bets and might outdo the policymakers’ warnings of rate hikes. US is hopeful that the inflation rate could drop below 7% for December for the first time in 13 months.

As Chair of the Federal Reserve of the United States, Jerome Powell is set to speak at an international symposium on central bank independence, organised by Sweden’s Riksbank, the dollar is expected to make some form of recovery. While he is expected to refrain from analysing Feds policies, he is expected to provide an interest rate outlook that lift the dollar that has depreciated.