IMF says monetary policy should be tightened to counter effects of commodity price rises

COOLUM, Australia, Aug 2, 2007 (AFP) – The International Monetary Fund (IMF) said Thursday that some countries may need to hike interest rates to keep inflation under control amid strong world growth and high fuel prices. “In the current context of continued very robust growth and rising prices in energy, commodities and food, to sustain this favorable outlook will require keeping inflation and inflation expectations under control,” IMF deputy managing director John Lipsky said.

“That may require policy actions,” he added, on the sidelines of an Asia Pacific finance ministers’ meeting.

Lipsky said inflationary pressures were building.

“Clearly many economies are now sustaining trend-like growth or perhaps even greater than trend-like growth that has been accompanied by a decline in unemployment rates and therefore, by conventional measures, high and rising rates of capacity utilisation,” he said.

“Those are the areas where it may be appropriate for further normalisation of monetary policy.”

Lipsky refused to specify which countries he was referring to but said lifting interest rates had helped produce sustainable economic growth in the past.

An IMF executive board evaluation of the eurozone