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Monday, April 22, 2024
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Experts advise caution when deciding to lower interest rates

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With optimism, announcements that interest rates will fall in the second half of this year, especially in our country where they are eight, nine, or even more than ten percent, have been greeted.

However, the International Monetary Fund (IMF) recommended banks a few days ago to be very cautious in “lowering” interest rates because, as they noted, there is still risk on the global scene. The Secretary-General of the Banking Association, Bratislav Pejaković, assesses that international financial institutions are very conservative in their assessments, but, he claims, the battle against inflation has not yet been won.

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Caution should be exercised in decision-making, says Pejaković, especially considering the upcoming elections for the new European Parliament, the presidential election in the USA, the blockage of shipping routes, and the completely uncertain economic trends.

Forecasts at the end of last year and the beginning of this year indicated that interest rates would fall in the second half of 2024. This encouraged especially heavily indebted citizens, but a warning from the IMF came a few days ago. Managing Director Kristalina Georgieva noted that there is still a high risk to the global economy if central banks start lowering interest rates prematurely.

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  • We should wait for that, premature easing is a greater risk than slight restraint. Since inflation is now declining in many advanced world economies and developing economies, attention should be focused on when interest rates should fall to be stimulative for investment and economic growthGeorgieva stated.

International financial organizations are, according to Pejaković, quite conservative in their assessments and recommendations for taking measures, and those from the IMF, he notes, are based on data from the last quarter of last year showing that economic activities have slowed down in 11 EU countries, and a recession is underway in the most developed member – Germany.

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