The head of the IMF said on Saturday it still believes in “low and stable inflation” despite a suggestion from its chief economist that targets could go higher.
At a conference in Cambridge, England, Dominique Strauss-Kahn played down proposals made by Olivier Blanchard in February that inflation targets could be raised from about 2 percent to 4 percent to allow central banks to respond better to shocks.
“I think this is an interesting idea that merits serious discussion, but it is not the principal question for monetary policy and should not distract us from more important concerns,” Strauss-Kahn said. “Let me also be clear — we remain an institution that believes that low and stable inflation delivers positive benefits for growth and macroeconomic stability.”
Earlier this week, it was reported that Germany’s Bundesbank had sharply criticized a joint IMF-EU aid plan for stricken Greece, saying the IMF had become the “Inflation Maximizing Fund.”
The EU-IMF scheme to bail Greece out has been highly contentious, mainly because of German ambivalence linked to its concerns over protecting the credibility and stability of the eurozone and monetary conditions in Germany.
Protesters briefly disrupted Strauss-Kahn’s speech at Cambridge University’s King’s College, which was hosting a conference organized by the Institute for New Economic Thinking, a body set up with a grant from financier George Soros.
Concealed above the stage in the main hall, the protesters unveiled a large banner behind Strauss-Kahn which read: “The IMF is part of the problem, not the solution.”
One of them cried: “Shut down the IMF.”
The banner was quickly removed and Strauss-Kahn brushed off the protest. Security staff, who said the protesters were young people and likely students, escorted them from the building.
Commenting on the global economic crisis, Strauss-Kahn said the world was on the path to recovery, but it remained “sluggish and uneven,” and the costs, such as high unemployment and public debt, “will take many years to overcome.”
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