The Bank of Japan must keep monetary policy ultra-loose as it will take time to re-anchor inflation expectations to its 2% target, International Monetary Fund’s chief economist Pierre-Olivier Gourinchas told Reuters.
But the central bank must be vigilant to the risk of price growth overshooting expectations, and be ready to tighten policy if inflation stays above its target for too long, he said.
“There’s an opportunity right now” to re-anchor inflation expectations at the central bank’s target with underlying inflation exceeding 2% and wages starting to rise, Gourinchas said in an interview conducted on Tuesday.
Read More : IMF Urges BOJ to Maintain Ultra-Low Rates, Emphasizes Readiness for Policy Shift