The International Monetary Fund’s (IMF) economic counselor has warned of the side effects of sharp monetary tightening. Noting that “Inflation is much stickier than anticipated,” he stressed that “financial risks have risen.”

“The economic slowdown is most pronounced in advanced economies. Inflation is falling more slowly than anticipated,” he wrote. “Recent banking instability reminds us, however, that the situation remains fragile. Once again, downside risks dominate and the fog around the world economic outlook has thickened.” He added:

Inflation is much stickier than anticipated, even a few months ago … Core inflation, which excludes energy and food, has not yet peaked in many countries.