IMF Chief Kristalina Georgieva Talks US Economy, Kevin Warsh

**SPEAKER_1** (0:02)
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**Lisa Abramowicz** (0:07)
I'm here with the IMF Managing Director, Kristalina Georgieva, after a momentous speech from Fed Chair Kevin Warsh. This is your first Jackson Hole Summit. I would love to just first say thank you for joining us. What was your takeaway from Kevin Warsh's speech? What did you think of it?

**Kristalina Georgieva** (0:22)
He did a great job. He articulated his views on the evolution of monetary policy in a rapidly changing world very clearly. And his commitment to price stability, that 2% is a target for the Fed to achieve was very clear. I think the audience was positively impressed by the clarity and also the message he communicated to the central banking community.
We have to be humble. The world is changing so rapidly. We have to carefully watch what is going on and make our best call for the benefits of people, for the benefits of the economy.

**Lisa Abramowicz** (1:09)
You wrote, you actually had also a speech later in the morning where you wrote, central bank's most critical role is to ensure inflation remains low and stable.
How do you understand the past five, more than five years where inflation has been above target? Is this the fault of central bankers? Is this something else that we can address?

**Kristalina Georgieva** (1:28)
What has happened over the last years is shock upon shock upon shock. And that pressed governments to borrow and spend more than they should. And of course, that has some inflationary impact. And also, we know that when we were hit by COVID, at that time, the public spending was perhaps a bit more generous.
But how do you know how much is enough when the world economy comes to a screeching stop? I would blame central banks only if they don't draw lessons from experience. And what we're seeing here in Jackson Hole and what we heard from Chair Warsh is they are drawing lessons from experience.

**Lisa Abramowicz** (2:21)
And the lesson, at least on its face, seems to be, perhaps they need to be a bit more restrictive in their policies. Do you think that more broadly around the world, that needs to be the approach, even though shocks are still going to keep coming, it seems like the shock after shock after shock isn't really changing.

**Kristalina Georgieva** (2:38)
We have to accept this reality, that the world is changing very rapidly, and that part of this change is a positive or a negative shock. Right now, we're dealing with two shocks that work in the opposite directions. We have the energy supply shock and then we have AI. One drags growth down, the other one pushes it up.
We have to get accustomed to an environment that is less predictable. What do you do in that environment? When first, build your buffers, especially in good times. Right now, the economy is doing well. Well, let's cut the deficit, bring down the debt, and to recognize that your best friend are sound policies and strong institutions.

**Lisa Abramowicz** (3:30)
Do you ever get frustrated? Do you feel like you're beating your head against the wall when you say, come on, get your house in order, to people who are saying, no thanks, maybe the next guy can come around to do it? It seems like no one's listening.

**Kristalina Georgieva** (3:40)
Some are listening. Look at emerging markets. They have done fabulously well. Their monetary policy frameworks are strong. Their fiscal frameworks are much better sometimes. We look at them, they do better than advanced economies. So some people that have had the painful experience of crisis are listening.
It is human nature.
When do we fix our roofs? When the sun is shining or when there is rain? So we will continue to shout, police, the sun is shining. It's a good time. Bring the roofers.

**Lisa Abramowicz** (4:21)
I didn't bring the roofers. Ken Rogoff, earlier a Harvard professor, was talking with my colleague Tom Kean and he said, ultimately, it's going to take a debt crisis to really cause developed markets to get their fiscal house in order. Do you agree?

**Kristalina Georgieva** (4:34)
Not necessarily. We have seen historically that actions have been taken in good economic times. Sound growth, good household spending, investments are booming, and then fiscal adjustments take place. But we have to recognize that we live in a world of popular desire for the government to spend more. Why? Because the government has done it over the last couple of crises, did it after COVID, did it after the energy shock from the war in Ukraine, and food price shock at that time. So people are saying, hey, you did it. Continue. Not affordable. My message to everybody is delay no longer. Why? Because debt levels are now above where they were after the Second World War.