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MNI:Higher For Longer Rates Needed To Tame Giddy Investors-IMF

(MNI) OTTAWA

Inflation remains a bigger risk than is being priced in, fund officials say.

Central banks need to "push back" against investors who are overly optimistic about slowing inflation and send the message that interest rates must remain higher for longer to prevent a resurgence of prices, IMF researchers said in a report Thursday.

Bond-market rallies have loosened financial conditions and counteracted the jump in official lending rates at a time when headline and core inflation remain too high and expectations could become unanchored, according to a blog post by officials at the Washington-based fund.

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Central banks need to "push back" against investors who are overly optimistic about slowing inflation and send the message that interest rates must remain higher for longer to prevent a resurgence of prices, IMF researchers said in a report Thursday.

Bond-market rallies have loosened financial conditions and counteracted the jump in official lending rates at a time when headline and core inflation remain too high and expectations could become unanchored, according to a blog post by officials at the Washington-based fund.

Keep reading...Show less