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International Monetary Fund. European Dept.

resurgence of Covid-19 cases—including those related to the Omicron variant—are likely to pose near-term headwinds to growth. However, these factors are expected to dissipate over the course of 2022, and the robust recovery is set to continue on account of a strong labor market, the normalization of the households’ savings rate, and the impulse provided by the Next Generation EU Plan. Upside inflation risks have increased. However, with temporary factors dissipating, inflation is projected to decline through 2022 and to remain below the ECB’s 2-percent target in the medium

International Monetary Fund. Asia and Pacific Dept

half years. Growth has been robust, inflation has eased, foreign exchange reserves have risen to a comfortable position, and public debt has remained stable as a share of GDP. Against a challenging and uncertain global landscape and upside inflation risks, the authorities should maintain prudent fiscal and monetary policies to underpin sustained high growth, build resilience to shocks, and further reduce poverty. “Structural reforms will also play an important role in unleashing the full potential of the economy. Many important reforms were adopted under the ECF

International Monetary Fund. Western Hemisphere Dept.

and geopolitical conflict. 6. The thrust of the staff appraisal remains unchanged . Higher global and domestic inflation pressures reinforce staff’s advice on the need for accelerated monetary policy tightening in Colombia. Amid rising inflationary pressures, low real rates, limited spare capacity, and an already high inflation rate, the central bank would need to continue raising interest rates on a frontloaded basis in order to safeguard its credibility, ensure that inflation expectations remain well-anchored, and insure against upside inflation risks. In line

Mr. Andre Meier
This paper studies inflation dynamics during 25 historical episodes in advanced economies where output remained well below potential for an extended period. We find that such episodes generally brought about significant disinflation, underpinned by weak labor markets, slowing wage growth, and, in many cases, falling oil prices. Indeed, inflation declined by about the same fraction of the initial inflation rate across episodes. That said, disinflation has tended to taper off at very low positive inflation rates, arguably reflecting downward nominal rigidities and well-anchored inflation expectations. Temporary inflation increases during episodes were, in turn, systematically related to currency depreciation or higher oil prices. Overall, the historical patterns suggest little upside inflation risk in advanced economies facing the prospect of persistent large output gaps.
Mr. Andre Meier

economies, these findings would suggest little upside inflation risk, although further disinflation may also be limited in general. However, this inference comes with two important caveats: Current output gaps might not be what they seem . Historical experience, especially from the 1970s, suggests that real-time assessments of spare capacity may be subject to very large ex-post revisions. Whether or not economists properly assess spare capacity today is impossible to tell. One may, however, derive some confidence from the fact that the profession is aware of the

International Monetary Fund
This paper estimates the extent of spare capacity in the U.K. economy using a range of methodologies pointing to an output gap and the behavior of inflation during large output gaps. The usefulness of fiscal rules in supporting fiscal consolidation is generally positive, and a more permanent rules-based fiscal framework is required. The banking system has recovered fast; however, the sustainability of the sector’s recovery is still uncertain, and risks remain. An update on reforms to the financial sector’s regulatory and supervisory framework is also provided.
International Monetary Fund. African Dept.
This paper discusses Rwanda’s First Review of the Standby Credit Facility (SCF) Arrangement and Sixth Review Under the Policy Support Instrument (PSI), Request for Waiver and Modification of Performance and Assessment Criteria. Performance under the PSI and SCF-supported programs remains on track. Nearly all quantitative program targets and structural benchmarks were respected: two quantitative targets were missed by minor amounts, and one benchmark was delayed. The IMF staff recommends approval of the first review of the SCF arrangement and the sixth review of the program supported by the PCI, as well as the request for waiver of nonobservance of the continuous external arrears criterion, and modification of forthcoming program criteria.