How Fiscal Restraint Can Help Fight Inflation by Tobias Adrian, Vitor Gaspar published by IMF (11/2022).
“Fiscal policy can ease the task of monetary policy in reducing inflation while mitigating risks to financial stability
Government support was vital to help people and firms survive pandemic lockdowns and support the economic recovery.
But where inflation is high and persistent, across-the-board fiscal support is not warranted. Most governments have already dialed back pandemic support, as noted in our October Fiscal Monitor.
With many people still struggling, governments should continue to prioritize helping the most vulnerable to cope with soaring food and energy bills and cover other costs—but governments should also avoid adding to aggregate demand that risks dialing up inflation. In many advanced and emerging economies, fiscal restraint can lower inflation while reducing debt…”
