The International Monetary Fund has urged the Central Bank of Nigeria and other monetary authorities to deemphasise monetary policy as a way of tackling the resurgence of inflation.
In a new report titled “Rethinking monetary policy in a changing world,” the Washington-based lender said the ability of central banks to set monetary policy and control the economy in more fraught times hinges on its independence.
According to the report, the low-interest rates and less extreme public debt levels that prevailed after the global crisis of 2008 permitted central banks to ignore what were then relatively inconsequential interactions between monetary and fiscal policy.
However, during the COVID-19 crisis, circumstances changed dramatically, and government spending rose sharply in many economies, the report stated.
It noted that as spending was increasing, countries were hit by supply shocks of unprecedented proportion, largely the result of pandemic-related problems—such as supply chain disruptions, which added to inflation pressures.