15:49 - 28.04.2023

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April 28, Fineko/abc.az. The International Monetary Fund (IMF) believes that the ECB and the Bank of England should exercise caution when raising rates, taking into account potential dangers ranging from increased financial stress to divergence in bond yields, ABC.AZ reports with reference to Bloomberg.

The IMF considers that central banks will need to remain flexible in case new tensions arise, similar to the recent problems in the U.S., which ultimately damaged Credit Suisse Group AG.

"Comfortable average capital and liquidity stocks of banks in the euro area and the UK provide a safety cushion, but recent problems in the banking sector show how liquidity difficulties and financial stress can manifest suddenly. Another episode of stress could undermine buffers, especially among banks with weaker fundamentals, and sharply tighten credit and financial conditions," the IMF said.

At that, the IMF thinks that the ECB will have to raise rates.

"High and potentially more stable than expected core inflation requires tight monetary policy until core inflation unambiguously returns to target," the IMF says.