Why does the IMF insist on low inflation in programs? Isn it true that growth and poverty reduction can occur at moderate inflation levels?
A. Inflation is the most pernicious tax on low-income households that lack the means to protect their salaries and scant savings against inflation. In addition to the negative impact on the poor, a large body of empirical evidence has established that when (annual) inflation passes the 5 percent mark investment and economic activity also suffer.1 It is against this background that the Fund supports policies aimed at achieving or maintaining low inflation.
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