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MNI: Central Banks Should Revisit Hot Economy Frameworks - IMF

(MNI) WASHINGTON

Central banks should revisit policy strategies that focus on running the economy hot given more palpable upside inflation risks, said International Monetary Fund First Deputy Managing Director Gita Gopinath.

"Policy strategies based on a flat Phillips curve, including 'running the economy hot' and 'looking through' temporary supply shocks, should be revisited," said Gopinath, the IMF's former chief economist, in a speech prepared for the Fed's annual Jackson Hole symposium. "While running the economy hot can indeed have important benefits, and is sometimes appropriate, we need to rethink the benefits and costs in light of the more evident inflation risks."

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Central banks should revisit policy strategies that focus on running the economy hot given more palpable upside inflation risks, said International Monetary Fund First Deputy Managing Director Gita Gopinath.

"Policy strategies based on a flat Phillips curve, including 'running the economy hot' and 'looking through' temporary supply shocks, should be revisited," said Gopinath, the IMF's former chief economist, in a speech prepared for the Fed's annual Jackson Hole symposium. "While running the economy hot can indeed have important benefits, and is sometimes appropriate, we need to rethink the benefits and costs in light of the more evident inflation risks."

Keep reading...Show less