Carlo Cottarelli, Director of the IMF's Fiscal Affairs Department (FAD) on NPR's Program "Will Overstimulating Economy Bring Inflation?"

Posted by Michel Lazare.

On June 26, 2009, Carlo Cottarelli, Director of the IMF's Fiscal Affairs Department (FAD) was interviewed by David Kestenbaum on National Public Radio's (NPR) program "Morning Edition." The general theme of this NPR segment was on the impact of fiscal stimulus and government spending on inflation and hyperinflation. Carlo Cottarelli made the point that while fiscal stimulus may be necessary at this juncture, central banks and governments should have an exit strategy and "start thinking now about how to exit when the moment comes."

Here is an excerpt from the NPR webpage summarizing this story, which also contains a shortcut to the audio:

"So are we at risk of catching a nasty case of inflation down the road? I took our U.S. economy in for a kind of doctor's office visit to a place that gives this advice out to countries all the time — the International Monetary Fund.

"What we have been telling ... not this country, but all our members, is that there is a need in the short run for macroeconomic policies to support economic activity. But there is a need for every central bank, for every government to have a strategy, to start thinking now about how to exit when the moment comes," says Carlo Cottarelli, the IMF's director of fiscal affairs.

There could be difficulties, he says.

Raising interest rates and pulling money back out of the economy is often unpopular. It's been said the role of a central bank is to "pull away the punch bowl, just as the party gets going." That time is arguably still in the future. As we all know, it's still a pretty lousy party."