Sri Lanka, Oct. 6 -- The International Monetary Fund (IMF) yesterday stressed that monetary policy should be ready to tighten if the Middle East war generates stronger inflation pressures across the economy.
The warning is conditional and does not amount to a call for an immediate interest rate increase.
The IMF's concern is over stronger "second-round" effects, where an initial shock, such as higher fuel costs, spreads into other prices and influences expectations about future inflation.
If those pressures intensify, the IMF said monetary policy should respond to reduce the risk of inflation expectations becoming unanchored.
For businesses and households, tighter policy could translate into higher borrowing costs, affecting investment,...