Finance leaders need to anticipate multiple inflation shocks

WASHINGTON, May 19 (Reuters): International Monetary Fund Managing Director Kristalina Georgieva said on Thursday that global finance leaders may need to become more comfortable with fighting multiple bouts of inflationary pressures.

Georgieva told Reuters on the sidelines of a G7 finance ministers and central bank governors meeting in Germany that it is getting harder for central banks to bring down inflation without causing recessions, due to mounting pressures on energy and food prices from Russia's war in Ukraine, China's zero-Covid policies that have slashed manufacturing with lockdowns, and the need to reorder supply chains to make them more resilient.

"I think what we need to start getting more comfortable with is, that may not be the last shock," she said, noting that she stopped viewing inflation as a "transitory" one time shock when the Omicron Covid-19 outbreak took hold late last year.

Meanwhile, Kristalina Georgieva said on Thursday she was "getting more optimistic" that a G7 agreement to provide new budget funding to Ukraine can be reached and can help the country avoid hyperinflation.

Georgieva said on the sidelines of a G7 finance ministers' and central bank governors' meeting that the main issue for the funding would be its timing - avoiding delays that may push the country into monetary financing, where its central bank effectively funds the government.

"You know, what happens if a country has to go into monetary financing. A war brings hyperinflation and then terrible, terrible, damage - which we think we can avoid," Georgieva said.