IMF's Georgieva cautions central banks against rapid rate hikes that could "suffocate growth"

IMF Managing Director Kristalina Georgieva (@KGeorgieva) warned that central banks could end up choking the global economy if they rush to raise interest rates in response to the Iran war's energy shock. Speaking to Bloomberg TV, she said the larger risk is an overreaction driven by lingering trauma from 2022 inflation, not the shock itself. Georgieva noted that long-term inflation expectations remain well anchored even as headline inflation projections have risen from 3.8% to 4.4%. That backdrop, she said, gives credible central banks room to wait and watch while making clear they are ready to act if needed. "My worry is because of '22, central banks may say let's move faster, and that could be very dangerous because it would suffocate growth," she said. She added that even if a ceasefire holds, the economic damage is already being locked in. Tankers take about 40 days to reach Pacific destinations, meaning supply-chain disruptions are still working their way through the system. Georgieva also pointed to a widening gap between buoyant U.S. markets and hardship elsewhere, arguing the United States is among the few large economies buffered by its status as an oil exporter while others absorb the shock. Asked about Donald Trump's pressure to remove Fed Chair Jay Powell, Georgieva defended central bank independence as "an economic asset" supported by decades of evidence. She said emerging-market central banks have outperformed many advanced-economy peers by sticking to disciplined, data-dependent policy.